PPPA board approves Rs92 billion for Hyderabad-Sukkur motorway project

To make the Hyderabad-Sukkur motorway project financially viable and attractive for private parties, PPPA board has approved a provision of Rs92 billion from the budget and through toll charges.

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The previous cost of the Hyderabad-Sukkur Motorway (M-6) which was Rs165 billion would now jump to Rs201 billion based on the new financing structure. The PPPA board meeting was chaired by the Ministry of Planning and Development Minister Asad Umar.

M-6 which is a vital component of CPEC could be the biggest project in the Sindh development package announced by the PM last week, said Umar. PPPA has authorised the viability gap fund and transaction structure for the Hyderabad-Sukkur motorway project, he added

The contractor will collect the toll from commuters for 25 years and the toll rate will be Rs860 per car for the first year, which the contractor will be allowed to increase 7.5% annually.

The board was presented with three options, out of which it picked the one that had had least burden on the budget, but would increase the overall project cost.

According to the minister, government contribution increased from Rs1.1 billion due to a change in the financing structure as the previous option was carrying uncertainty for the contractors. The earlier model was that the revenue of the Multan-Sukkur motorway would be provided for 10 years to the contractors of the Hyderabad-Sukkur motorway to make it financially viable.

The board approved the construction of motorway project on build, operate and transfer (BOT) model with both capital and operational viability gap funding (VGF) amounting to Rs92 billion.

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It approved the provision of Rs43 billion from the budget during the construction period as capital injection and another Rs49 billion as operational VGF with Rs7 billion per annum for the debt service period of seven years, according to the decision.

The project would be advertised for bidders’ participation once it gets approved by the Executive Committee of National Economic Council (Ecnec), said the minister.

The Central Development Working Party (CDWP) deferred approval of the project due to pending decision on the VGF last week.

Responding to a question, the minister said that that Hyderabad-Sukkur Motorway project cost would be decided by the CDWP and the PPPA board had only approved the VGF.

Land for the project will also be purchased by the federal government through a separate project.

The length of proposed Hyderabad-Sukkur Motorway will be 306 km, 14 interchanges, one major bridge on River Indus, six flyovers, 10 Service Areas and 12 Rest Areas will also be built on this motorway.

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