LAHORE: The government is likely to award operation & maintenance (O&M) contract of the Lahore Orange Line Metro Train Project to a joint venture of Chinese and South Korean firms, as the entire process related to procurement, bidding, evaluation has been completed. The companies (if awarded the contract) will be responsible for operating and maintaining the orange line for a period of 11 years, according to official sources.

“After an exhaustive evaluation process completed by a team recently, the bid of the JV of Chinese and Korean firms for the orange line’s O&M contract has been found reasonable. So the team working on it has recommended awarding the contract to this JV led by Chinese firm,” an official source told Dawn on Tuesday. “Hopefully, the Punjab Mass Transit Authority will accord its approval in this regard soon,” he added.

The project had been envisaged by the outgoing PML-N provincial government in December, 2013. Open international tenders were floated on Jan 29, 2014. And after a meeting of the president of Pakistan with the Chinese premier on Feb 19 in Beijing, the China decided to fund the project. It was also decided that the Chinese enterprises would execute the project using its expertise. By funding the project, China declared it a gift to Pakistan. Similarly, on June 24, China recommended CR-NORINCO Joint Venture for execution of the project. And finally on Aug 4, CR-Norinco emerged as the lowest bidder with bid price of US$2.139 billion.

After getting a go-ahead in this regard, the LDA started the procedure under Land Acquisition Act, 1894 (“Act”) in 2015. The 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 a ‘soft loan’ for the project and released the first tranche of US$331.08 million (Rs33 billion).

“According to the agreement, the commercial operation date (COD) of the project comes six months after handover of the completed civil works to Chinese (CR-Norinco). Therefore, most of buildings (stations, Depots etc) were handed over to the Chinese on May 20 and the couple of remaining structures on June 4. And if we consider June 4, 2019 as the final date for handover, the COD of the project would be December 4, 2019. So you can say that the orange line will start its commercial operation in December, this year,” the official explained. “However, non-critical works such as carpeting of roads, footpaths, paint etc), which are not related to the works done by the Chinese (electrical, mechanical/laying of track, signaling, operations etc) would continue side by side and will complete before the COD of the project,” he claimed.

Previously, there was a plan to entrust the CR-Norinco with the O&M of the project. But later, during evaluation process, the bid of the Chinese-Korean JV was found suitable. Under the contract, whosoever wins the bid, will be responsible for the O&M of the project for 11 years. And after passing of 11 years, the JV/firm would be liable to transfer the project’s O&M control to the government (PMTA). “Though the O&M contract is extendable, we will try not to do so since, by that time, we will be able to do this job on our own. I think 11 years are sufficient for our capacity building to run such first and innovative project,” the official believed.

Previously, under the agreement, the damages arising out of delay in the project included rate of liquidated damages at the rate of 0.2 per cent (minimum) to 10pc (maximum) of the total contract price of the project’s civil work, local contractors’ idling charges etc. Thus, the accumulative damages had been calculated at Rs51 million (per day) in case of delay. And in case any dispute over the Loan Agreement was not resolved through friendly consultation, the same would be liable to be referred to the China International Economic and Trade Arbitration Commission (CIETAC) for arbitration.

“Under the agreement, both parties (China and Pakistan) were liable to pay penalty if there was any delay on part of any party. But now the relevant clause of the agreement regarding imposition of penalty is no more implementable since both the countries have resolved the issue amicably. And now no party would pay any penalty regarding delay,” he explained. He said the O&M contractor would almost have five to six months to train the drivers. “Each rake of the train, including engine, would have only one driver, as there would be no assistant driver or checkers etc,” he added.

According to another official, the project execution was delayed by five months or so. “The actual deadline for the project’s COD is July 31, 2019. But the entire work will complete by November end or December’s start,” he said. He said since the test run of the train had already been conducted twice—first in the Shahbaz-led government’s tenure and the second one in the ongoing tenure of the PTI government, the train would start its operation for the passengers (COD) in November or December.

Published in Dawn, June 5th, 2019