LAHORE: Punjab will have to pay damages of Rs51 million (per day) to the Chinese government if it fails to complete the country’s first mega and innovative mass transit project -- Lahore Orange Line Metro Train -- within the stipulated time.
The ambiguity about the deadline set for the completion or the commercial operation date (CoD) persists as the official sources are still unaware of the actual date after which the Punjab government will be liable to pay huge damages to be calculated on a daily basis.
“The damages arising out of delay in the project include rate of liquidated damages at the rate of 0.2 per cent (minimum) to 10 per cent (maximum) of the total contract price of the project’s civil work, local contractors’ idling charges etc. Thus, the accumulative damages will be Rs51 million (per day) in case of delay,” reveals a document uploaded on an official website of the Punjab government.
“In case any dispute over the Loan Agreement is not resolved through friendly consultation, the same shall be referred to China International Economic and Trade Arbitration Commission (CIETAC) for arbitration,” it adds.
It says the open International Tenders for the project were floated on Jan 29, 2014. Later, a meeting of the President of Pakistan with Chinese premier was held on Feb 19 in Beijing. During this meeting, the Chinese premier decided to fund the Orange Line project with the condition that Chinese Enterprises would execute the project using their (Chinese) equipment. He also declared it a Chinese gift to Pakistan.
On June 24, China recommended CR-NORINCO Joint Venture to execute the project. And finally on Aug 4, CR-NORINCO emerged as lowest bidder with bid price of USD 2.139 billion.
After getting a go-ahead, the LDA started procedure under Land Acquisition Act, 1894 (“Act”) in 2015. Work on the project started in October 2015. It was on Dec 21 that an agreement was reportedly signed between the federal government and Exim Bank of China for the provision of funds for the project. Under the agreement the bank pledged to provide Rs162 billion as soft loan for the project and it released the first tranche of US $331.08 million (Rs33 billion).
“No one knows about the project completion or its actual CoD. But if we consider October 2015, the month in which the work on the project started, the deadline will be January 2018 as per the 27-month completion time. If we take December 2015, the month in which Pakistan and China signed Rs162 billion loan agreement, the deadline appears to be March 2018. And if we assume May 2016, the month during which China released first tranche of Rs33 billion of the total loan value, the deadline is August 2018. All these deadlines have already passed and the project still needs six to seven months more to complete,” an official source told Dawn on Friday.
He said the outgoing Shahbaz Sharif-led Punjab government wanted to complete the project by December 2017 or March 2018 (before end of its five-years term) by all means. But it couldn’t do so due to bottlenecks. “They, however, succeeded in getting trial run of the trains conducted at selected stretches of packages 1 and 2 before May 31 -- the last day of the government’s term,” he said.
The official quoted senior officers as saying Dec 31, 2018, is the final deadline for the project CoD. “And if the project remains incomplete even on this date, the government will have to pay aforementioned damages on a daily basis to China,” a source quoted a senior Punjab government official as having said in a meeting of the project steering committee.
The project had been embroiled in controversy from the get-go in 2015 after the civil society pointed out that it would be devastating for many heritage sites situated along the route. Construction on the project was halted for several months after the Lahore High Court issued a stay order. The government challenged the court verdict in the Supreme Court that later allowed the government to resume the construction after “imposing nearly 30 measures” to protect the heritage sites.
“The major cause of delay in completion of the project was the litigation. Owing to this the work on the sites situated within 200-foot radius of the heritage sites couldn’t be executed. We expedited the work after court permission but couldn’t complete it. Later, non-issuance of payments to contractors appeared to be another issue. After March, the government didn’t pay us even a penny,” claimed one of the contractors.
According to an official of the Lahore Development Authority, the project is likely to be completed in February 2019. “We are striving for completing it by February,” he said.
He said the project partners were holding discussions these days. “We will also tell court about our plan for early completion of the project,” the official said.
Published in Dawn, August 25th, 2018