Govt Defers ML-3 Rail Project for Third Time
The government has deferred approval of the $1 billion ML-3 rail project for a third time in five months, leaving the upgrade of the track meant to carry minerals from the Reko Diq mines in limbo.
The Central Development Working Party (CDWP) put off the Rs278 billion project again this month, according to Ministry of Planning officials. Funding constraints and a possible change in the port used to ship the minerals, from Karachi to Gwadar, were behind the delay.
The project covers the 996-kilometre ML-3 track from Nokhandi to Rohri. The line has outlived its life, and trains now crawl along it at 30 kilometres per hour. It needs a complete rebuild before it can carry heavy mineral cargo.
ML-3 rail project deferred for a third time
The CDWP has now considered the project three times, first in June and then in August. At the second-last meeting, it kept the project on hold until the Ministry of Railways gave a consolidated picture of its funding needs for the next five years, covering its own resources, Public Sector Development Programme (PSDP) money, and alternative financing without PSDP funds.
Planning Minister Ahsan Iqbal said the project was deferred for more information about bridge financing with Barrick Gold, the company running the Reko Diq Mining Company. The government had already approved a $390 million loan from the mining company at about 6 per cent a year to complete the track.
Why the port question matters
The plan was to move the minerals by rail to Karachi port. Officials now say they might instead go through Gwadar Port, which would need fresh commitments from the mining company on the loan and a fully functional Nokhandi-Panjgur-Gwadar road link.
A Barrick Gold delegation met Ahsan Iqbal this week to discuss the road project. The minister stressed the need to fast-track the Nokhandi-Gwadar road corridor with the federal and Balochistan governments and the mining companies.
The delay comes as Pakistan puts a renewed focus on its mineral wealth. Executives of Barrick Gold, Ivanhoe Atlantic and Minmetals addressed the Pakistan Minerals Investment Forum this week, where 13 mineral agreements were signed. Prime Minister Shehbaz Sharif and Chief of Defence Forces Field Marshal Syed Asim Munir stressed that Pakistan should export finished mineral products, not just raw material.
The funding gap
The finance ministry says the mining company had promised the bridge financing, which the government was supposed to return by June 2028 through a bullet payment. At the agreed rate, total repayment will be nearly $450 million.
For the current fiscal year, only Rs250 million has been allocated for the project. The Planning Commission has warned that if the funding cannot be arranged, the project will be delayed and its cost will rise sharply. It also noted that the project documents said nothing about consultation with the Reko Diq Mining Company.
Ahsan Iqbal has asked the Ministry of Railways where the money will come from, since the project cannot be funded through the PSDP. He directed it to give a five-year funding picture for ML-3, ML-2 and ML-1 and to take up projects only as funds allow. The railways’ development portfolio is limited to around Rs40 billion.
The wider rail problem
The government is already struggling to fund the ML-I line between Karachi and Peshawar, and is weighing an Asian Development Bank loan, a Frontier Works Organisation-led lease model, and pledging railway land with domestic banks.
Barrick has already shown interest in mineral processing in Karachi and Gwadar, which is why the port choice matters so much.
For now, the ML-3 upgrade waits on two answers: where the money comes from, and which port the minerals will leave from.
Frequently asked questions
What is the ML-3 rail project?
It is the Rs278 billion, or $1 billion, rehabilitation of the 996-kilometre track from Nokhandi to Rohri, planned to carry minerals from the Reko Diq mines.
Why has the project been deferred?
The CDWP deferred it for a third time in five months because of funding constraints and a possible change in the shipping port, from Karachi to Gwadar.
How much bridge financing was agreed?
The government had approved a $390 million loan from the Reko Diq Mining Company at about 6 per cent a year, to be repaid by June 2028 in a bullet payment of nearly $450 million.
How bad is the current track?
Trains run on it at 30 kilometres per hour, and only one or two freight trains a month run between Quetta and Taftan.
What happens next?
The Ministry of Railways must give a five-year funding picture for ML-3, ML-2 and ML-1, and fresh commitments are needed from the mining company if the minerals are to move through Gwadar.
