The Executive Committee of the National Economic Council (Ecnec) has reportedly not cleared Rs 13.9 billion project of coal conveying system from Pakistan International Bulk Terminal (PIBT) to Railway network at Port Qasim on an EPC basis until a commercial model of the project is not finalised, well informed sources told Business Recorder. Giving the background, the sources revealed that on February 11, 2016, Chief T&C, Ministry of Planning, Development & Reform (MPDR) informed the CDWPP that project sponsored by the Ministry of Ports & Shipping and to be executed by Port Qasim Authority (PQA) on an EPC basis at the total estimated cost of Rs 15.8748 billion ( $ 151.320 million) envisages construction of coal conveying system measuring 4.5 km (approximately) for transportation of coal from PIBT coal terminal to railway siding and loading of coal onto railway wagons for onward transportation to the proposed coal-fired power plants. The project is being taken up on the directives of the Prime Minister’s Office as per the decision of Cabinet Committee on Energy taken on September 16, 2015. He further revealed that the project would be funded through PSDP as per PM’s directives; however, the possibility for operation of the conveyor belt by outsourcing will be explored well within time, by PQA, before completion of the project. He further stated that the basis of cost estimates should be provided, and the amount of contingencies and supervision charges provided at 3% and 5% of the cost may be reduced. He further stated that at the time of approval of the PM on the summary moved by M/o P&S, it was proposed to build approximately 5 km of conveyor belt at an estimated cost of $ 40 million, whereas the instant cost is $ 151 million. Ahsan Iqbal, the Minister for Planning, Development and Reforms/Chairman CDWP enquired about the proper justification for taking up the proposed project through PSDP and basis of cost estimates. He further stated that the proposed activity is of commercial nature and there should be some mechanism of pay back/return on the investment to the GoP, so that the investment could be secured and revenue/pass through tariff should not be consumed by the private agencies. The operations will be charged by the PIBT/PQA and Railways and the FSA “Fuel Supply Agreement of Railways with the Power Plants Producers” may include the instant capital cost. He further stated that due to the time constraint and as per directives of the Prime Minister the proposed funds may be considered to be provided through PSDP as loan/CDL to the sponsors for return through a mechanism to be developed later on. Member (I&RC) asked the sponsors about the basis of cost estimates and specifications of the proposed system/equipment. He observed that the cost of the equipment seems on the higher side. If the project is to be executed on an EPC basis there is a possibility of low bids depending on international bidding and equipment standards. Secretary Ports and Shipping while responding to the above asked representative NESPAK to give a detailed presentation on the plant design and working of the proposed conveyor belt system. After a detailed presentation and explanation of the layout plan, Secretary Ports and Shipping explained that the system is proposed to be funded through PSDP on the directions of the Prime Minister to fill in the infrastructure gap between the terminal and the Railway Station, as the railway network could not be extended to the terminal owing to gradient issue. Hence the task was assigned to the PQA, who will execute the project and maintain it. Owing to the strict timelines, completion will be in sync with the completion of Sahiwal coal- fired power plant till March 2017. Due to this, the project is proposed to be funded through PSDP. Regarding basis of cost estimates, he stated that the PC-I is based on the concept design and a technical study report. The parameters of the system and requirements have been clearly indicated in the report and accordingly the tenders on EPC basis with international standards/specifications will be floated to ensure the quality of the system. He further stated that the observations of the Chairman CDWP would be looked into and a financial model for return/pay back on the investment from PSDP would be worked out owing to commercial nature of the project. To finalise recommendations for the ECNEC, the following issues were discussed in the details on February 22, 2016 as CDWP approved the project in principle for consideration of ECNEC subject to: (i) rationalisation of cost by a committee headed by Member (I&RC) & Member (I&M), Planning Commission with member as Chief T&C, Chief EA of PD&R Division, JS (Finance Division) and representatives of M/o Ports & Shipping, M/o of Water & Power, M/o of Railways and Port Qasim Authority; (ii) a workable financial model will be developed in consultation with M/o Finance& IPDF by the above referred committee for return of PSDP funding after completion of project being a commercial in nature; and (iii) a summary for ECNEC will be prepared including the rationalised scope and cost along with the proposed financial mechanism for repayment of PSDP funds during operational phase of the project.” After a detailed discussion and deliberations on the project, the committee recommended as under: (i) cost of equipment and infrastructure is based on preliminary conceptual design; hence the cost cannot be treated as firmed up cost; (ii) cost of railway infrastructure, amounting to Rs 1,391.019 million @ Rs 173.877 million/Km is very high which needs to be reduced / rationalised; (iii) the provision of “Transport & Insurance @ 3% should be excluded from the cost estimates; (iv) the “Design & Supervision Charges” should be reduced from 5% to 3%; (v) the project is to be executed on EPC basis, hence the provision of contingencies at 3% and EPC contractors risk @ 15% is not supported; and (vi) the review committee observed that being a high priority project, federal funding may be arranged through re-appropriation to meet the given time lines, however, financial model for recovery of capital cost will be worked out simultaneously with the O&M financial model and will be submitted to the ECNEC separately. In light of recommendations, the cost of project has been rationalised from Rs 15.8748 billion to Rs 13.3328 billion without FEC (overall reduction of Rs 2.542billion). The Ecnec, in its meeting on March 8, 2016 considered and approved in principle the proposal from Ministry of Ports and Shipping for provision of coal conveying system from Pakistan International Bulk Terminal (PIBT) to Railway network at Port Qasim. Under the project, construction of coal conveying system measuring 4.8 KM and laying of 8 KM railways track with allied structures and facilities for transportation of coal from PIBT coal terminal to railway siding and loading of coal onto railway wagons for onward transmission to the proposed coal fired power plants will be undertaken.