The Punjab government has dropped the idea of entering into a partnership with a private company to build the Southern Loop of the Ring Road, after exploring the idea for over a year, The Express Tribune has learnt.
The chief minister, at a meeting regarding the project in November, approved the construction of the Southern Loop in partnership with a private company on a build, lease and transfer (BLT) basis, meaning the company would build the road and then lease it to the government.
But the Public-Private Partnership Steering Committee of the Punjab government, at its seventh meeting on Wednesday, decided to drop the plan on the grounds of high cost.
“Construction would have been very expensive,” said Planning and Development Board Chairman Javed Aslam, who attended the meeting. The cost of building the road had been estimated at around Rs60 billion, but the government would have had to pay its private partner Rs180 billion, he said.
Had construction companies agreed to a build, operate and transfer (BOT) basis for the project, the steering committee would have likely approved it, “as this is more like taking a loan from a private investor,” he said. Instead, he added, the government will now explore the possibility of funding the construction by generating commercial activity.
Sources in the Punjab government said that no party was ready to build the Southern Loop on a BOT basis since there wasn’t much traffic expected to ply the road, meaning there was not enough revenue to be had in terms of tolls. They said that another hitch for the BLT idea was that the construction company would have demanded a sovereign guarantee, obtaining which, from the federal government, would have been a problem.
The sources said that the government had purchased land on either side of the proposed road, which could be commercialised in order to generate funds. They said that industrial estates as well as housing could be developed on the peripheries.
The steering committee had approved the pursuit of a public-private partnership in January 2012 and invited expressions of interest. China State Construction Engineering Corp, Albayrak Smadb (joint venture), Saadullah Khan and Brothers and the Frontier Works Organisation (FWO) prequalified for bidding.
At Wednesday’s meeting, consultants told the committee that an advance annuity of Rs10 billion would have to be paid to the construction company. Aslam said that it was feared that the project would become a financial drain on the government in the coming years.
The 40-kilometre Northern Loop of the Ring Road, running clockwise from near Gulshan-i-Ravi to near DHA Phase V, is almost complete.
Streetlights and car fitness
The steering committee approved the inviting of bids for two other projects: one to install LED streetlights all over Lahore, and the other to set up a vehicle inspection and certification system.
Aslam said that the city’s old sodium lights, consume 120 per cent more energy than LEDs. The government would pay the successful bidder over the next 10 years from the money it saves in electricity consumption, he said.
He said that K&N International Islamabad, a private company, had placed an unsolicited bid to the city government to replace the streetlights. Other bids will be invited through official channels. Should a company placing a solicited bid match the offer of K&N International, the former’s bid will be accepted.
A consortium of Systech International, Sweroad and Swede Tech has already placed an unsolicited bid to set up vehicle inspection and certification system, Aslam said. The system would prevent accidents due to unfit vehicles. It would also lower emissions, as vehicles would require clearance before they would be allowed to ply the roads in the province, he said.
The committee also discussed re-structuring of the Punjab grain storage project, which no bidder had expressed an interest in, Aslam said.
Published in The Express Tribune, March 8th, 2013.