Lahore MRTS project spade work to cost $ 7.5-mn

Faisalabad: The cost of preparing the Lahore Rapid Mass Transit System Project, to finance the recruitment of transaction advisor, is estimated at $7.5 million equivalent, including foreign exchange component of $6.0 million and local currency costs of $1.5 million equivalent.

According to Punjab Planning & Development Board (P&D Board) sources, an urban rapid mass transit system would likely impact Lahore and its large population of poor residents in a number of positive ways. It would allow the city to function effectively, even when congestion is severe, and enable people to commute more easily to work.

The additional capacity provided would allow the dynamic city centre to thrive economically, and over time help to fundamentally shift the structure of the city, and guide and support future development in a more balanced, sustainable manner. Other road users would benefit from reduced congestion and pollution. The government would benefit from policy options not previously available that accelerate an understanding of the need to manage the urban transport system as an integrated whole, sources said.

The first phase of Lahore Rapid Mass Transit System Project will provide key intervention for long-term partnership between Asian Development Bank and Pakistan to develop Lahore's transport sector. It supports recruitment of a transaction advisor to help formulate, structure, and take to the market a public-private partnership for the first priority line of a proposed rapid mass transit system (RMTS) in Lahore. Lahore is the capital of Punjab province and the second largest city in Pakistan. Its population, just under 9 million, is growing at a rate of about 3.0 percent per year. Despite a number of initiatives over the years, such as introducing and improving fleets of buses, traffic gridlock and congestion, are now constraining growth, curtailing investment, and reducing the city's competitiveness.

Based on feasibility studies and other analysis, the Lahore RMTS has strong potential to provide an attractive and efficient option for public transportation, an alternative to private vehicles, and a cleaner technology than the existing bus and other transport technologies. In sum, the proposed RMTS will help reduce constraints on growth, investment, and city competitiveness currently imposed by the state of Lahore's transport system.

The Government has requested a loan of SDR 3,794,000 ($6,000,000 equivalent) from ADB's Special Funds resources to finance 80 percent of the total TA costs. The loan will have a term of 32 years, including a grace period of 8 years, an interest rate of 1.0 percent per annum during the grace period and 1.5 percent per annum thereafter, and such terms and conditions as set forth in the draft loan document.

The government will provide the remaining $1,500,000 equivalent, or 20 percent of the total TA cost, to cover local currency costs. As most of these funds will be provided in kind for program support in the form of workshops, surveys, office space, and related local support, the availability of counterpart financing should not be an issue. The government has been advised that approval of the TA loan does not commit ADB to financing any ensuing project. The government will re-lend the loan proceeds to the PPG on terms and conditions satisfactory to ADB.

Planning & Development Board sources said that prior to consideration of ADB project financing, engagement of a transaction advisor is required to formulate financial structuring, undertake detailed due diligence, and package the Lahore RMTS to attract private capital and management. The transaction advisor, in close consultation with ADB and the government, will help prepare and launch a PPP transaction for the green line. ADB is willing, in principle, to partly finance the public-sector-financed portion of the Project under the multi-tranche financing facility modality.

Sources said that the transaction advisory work wo