Rs. 175 Billion Hyderabad-Sukkur Motorway Faces Delays

National Highway Authority (NHA) has missed the deadline to start construction of Hyderabad-Sukkur Motorway project, which would escalate overall cost of the project.

The project was proposed to be completed in three years with an estimated cost of Rs 175 billion on build-operate-transfer (BOT) basis.

Former Prime Minister Nawaz Sharif had directed to start construction work in the first quarter of 2017. However due to complexity of the project, NHA has missed the deadline and work is expected to be started next year i.e. 2018, senior officials at NHA confirmed.

The NHA executive Board has approved the procurement process for Hyderabad-Sukkur Motorway and agreed to issue Letter of Intent (LoI) to China State Construction Engineering Corporation for the project.

Sources said that following the Board approval, NHA has issued LoI to the Chinese company; however financial close is likely to take 6-8 months time.

The NHA executive Board has cleared the project structure and advised NHA to submit a project concept note to Central Development Working Party (CDWP) and take them on board for arranging viability gap funding by the government of Pakistan in the form of buyer’s credit loan.

To improve the viability of the project, a certain portion of the total project cost will be arranged by the concessionaire in the form of supplier/buyers credit. This portion of loan shall be repaid by the GOP/NHA as per agreed terms and conditions, after construction period.

The remaining project cost shall be financed by the concessionaire, as (a) equity requirement – the successful bidder (sponsor) will have to invest minimum thirty per cent (30%) of the remaining project cost as equity, through a special purpose vehicle (SPV), which shall be incorporated specifically to undertake the project (b) Commercial loan – the successful bidder (sponsor) will have to arrange maximum seventy percent (70%) of the remaining project cost as debt. According to documents, the project will be given on lease for 18 years.

An advertisement was released in the national and international print media on October 10, 2016 for inviting Expression of Interest (EoI) regarding pre-qualification of firms. In response 10 firms/joint ventures submitted their EoI. Six international firms pre-qualified for the Hyderabad-Sukkur Motorway project.

The NHA bid opening/evaluation committee opened technical proposals on February 14, 2017. Subsequent to finalization of technical evaluation, financial proposals of all the three bidders were opened on March 7, 2017. Keeping in view the scrutiny of financial proposals of all the three qualified bidders emerged as China State Engineering Corporation-1st, Shandong+FWO+Sinohydcro JV-2nd and China Communications-3rd.

The NHA is undertaking construction of Peshawar-Karachi Motorway (PKM), a high speed, controlled access, modern motorway system. All the segments of PKM have either been completed or awarded for construction except Hyderabad-Sukkur Motorway link of PKM. Now NHA intends to undertake construction of Hyderabad-Sukkur Motorway (M-6), 6-lane divided limited access facility on BOT basis. The 296-km long project will be 6-lane motorway with design speed of 120 km/h, having 70 bridges, 15 interchanges and 243 underpasses.

According to the Ministry of Planning, Development and Reform, Rs 2.5 billion have been earmarked for the Sukkur-Hyderabad section in the Public Sector Development Program (2017-18) while the project will be completed at a total cost of Rs 175 billion.