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Sukkur-Hyderabad Motorway Gets Approval With Astonishingly Low VGF

The Public-Private Partnership Authority (P3A) Board has approved the project proposal for the construction of Sukkur-Hyderabad Motorway (M6) at astonishingly low Viability Gap Funding (VGF) of Rs. 9.5 billion, which is around 3 percent of the project cost.

During the 20th meeting of the Public-Private Partnership Authority (P3A) Board, the Kharian-Rawalpindi Motorway (KRM) and Project Development Facility (PDF) Regulations, 2022 on Public-Private Partnership (PPP) basis were also approved.

The meeting was informed that National Highway Authority’s (NHAs) international competitive bidding process for Sukkur-Hyderabad Motorway received two bids from M/s ZKB and M/s Techno-CMC-ACC. Both the bids were able to meet technical qualification requirements as specified in the bid documents.

However, the consortium led by M/s Techno offered the best financial terms to the government/NHA and was declared as the most advantageous bidder. It was informed that the consortium has deposited a bank guarantee of Rs. 150 million and its VGF was far lower than its competitor M/s ZKB, according to an official source. The source said that M/s ZKB demanded Rs. 170 billion VGF for Sukkur-Hyderabad Motorway.

The project proposal for the construction of the Sukkur-Hyderabad Motorway was approved in the meeting. The board considered the project proposal of the successful bidder which had demanded provision of capital Viability Gap Funding (VGF) amounting to Rs. 9.5 billion only. The project encompasses the construction of a 306km green-field controlled access motorway at a cost of Rs. 307 billion.

The successful bidder has proposed to pay Rs. 408 billion guaranteed revenue share to government/NHA over the operations period of 22 years. The project also expects to generate Rs. 918 billion in the form of corporate taxes. During the meeting, it was informed that M6 is the only missing link between the country’s north-south bound motorway network. With its completion, the commuters will be able to use the motorway network while travelling from the port city of Karachi to Peshawar and vice-versa.

The project is expected to generate phenomenal economic benefits by promoting tourism, creating job opportunities, reducing travel time, saving costs and contributing towards the socio-economic development of urban and rural centers along the corridor.

Following approval of the PPP contract by the P3A Board, the concessionaire will initiate the financial close process for the project followed by the construction and operations period. The concession period of the project is 25 years including 30 months construction period and 6 months financial close period.

Deputy Chairman of Planning Commission (DCPC) while highlighting the importance of the project said, “M6 is one of the most important projects in the Sindh Package that the incumbent government had designed to benefit masses of the province and when it becomes functional the region is going to witness a major uplift in trade and economic activities.”

During the meeting, it was further informed that Sindh will pay for the land acquisition on behalf of NHA, and meetings in this regard have taken place with provincial authorities.

The board also accorded approval to the project proposal of ‘Construction of Kharian-Rawalpindi Motorway (KRM) on a PPP basis. KRM has been approved by Risk Management Unit, Central Development Working Party, and Executive Committee of the National Economic Council.

The project will be floated in the market in a short while. KRM is a 117km 4-lane (convertible to 6-lane) green-field facility that is expected to be completed in a period of two years following the achievement of financial close by the concessionaire.

The Board also approved Project Development Facility (PDF) Regulations, 2022 which envisage providing financial support to the implementing agencies to meet transaction advisory costs related to the PPP project development, structuring and procurement.

Under the said regulation, P3A is already providing PDF support to several implementing agencies including Pakistan Post to prepare its flagship logistics business project for offering to the private sector.

The meeting was chaired by Deputy Chairman of Planning Commission (DCPC) Dr Mohammad Jehanzeb Khan and was attended by Secretary PD&SI Abdul Aziz Uqaili, Additional Secretary Finance Division Imamdullah Bosal, Members Private Sector Development Asim Saeed, Akbar Ayub Khan and Huma Ejaz Zaman. Secretary Ministry of Communication Zafar Hasan, Chairman National Highway Authority Captian Muhammad Khurram Agha (Retd) and Chief Executive Officer P3A Malik Ahmad Khan.

  • 75 years after Pakistan has came into being and we still lack a modern highway / railway that connects north and south of Pakistan. What more can be said about every government having its priorities in the wrong direction.

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