Final cost of ECRL is RM81 billion — MOF
KUALA LUMPUR: The Finance Ministry (MoF) yesterday revealed that the final cost of the East Coast Rail Link (ECRL) project is RM81 billion and emphasised that it must be reduced significantly to be financially viable.
In a statement, Finance Minister Lim Guan Eng said the final cost is also not expected to cover operating costs of the ECRL.
“Indeed, the RM81 billion project cost does not include the operating deficit, which cannot be determined for now. Furthermore, the Selangor state government is also objecting strongly to the completion of the Gombak-Port Klang portion of the rail line,” he said.
To recap, the ECRL project was first approved by the then Cabinet on October 21, 2016, while the Engineering, Procurement, Construction and Commissioning agreement was signed with China Communication Construction Company (CCCC) on November 1 of the same year.
The original project scope was to build a rail line from the Integrated Transport Terminal (ITT) Gombak in Selangor to Wakaf Bharu in Kelantan at a cost of RM46 billion.
On May 13 last year, the previous administration signed an additional agreement with CCCC to carry out phase two of the project, which was to extend the line from ITT Gombak to Port Klang for RM9 billion.
Earlier on May 3, 2017, the Cabinet also approved the northern extension of the project from Wakaf Bharu to Pengkalan Kubor in Kelantan, at a cost of RM1.28 billion.
Subsequently on Aug 23, 2017, the Cabinet further approved the upgrading of the ECRL to a double-tracking project which would cost an additional RM10.5 billion.
Based on these figures, Lim said the basic construction cost of the 688.3 kilometre (km) rail line amounted to RM66.78 billion.
However, he said the total cost of the ECRL will be RM80.92 billion after taking into account land acquisition, interest, fees and other operational costs.
He explained that the costs could be divided to two components, namely the development cost which includes construction cost (RM66.78 billion), land acquisition cost (RM2.5 billion) working capital (RM50 million) and other operational costs (RM500 million).
According to Lim, another component was the financing cost which comprised interest (RM7.44 billion), sukuk coupon (RM3.19 billion), commitment fee (RM238 million) and management fee (RM216 million).
He said to date, the government via its wholly-owned operating subsidiary, Malaysia Rail Link Sdn Bhd (MRL), had paid CCCC RM19.68 billion, comprising an advance payment of RM10.02 billion and progress payment of RM9.67 billion.
He said the advance payment was backed by an advance payment bond of the equivalent amount which may be redeemed by MRL to recover up to RM10.02 billion.
‘‘Hence, in the event of a worst case scenario, the Federal government can recover RM10.02 billion of the RM19.68 billion paid.
“Based on the above facts and figures, as well as feasibility studies for the project, we expect the ECRL project to only become financially and economically feasible, if there is a drastic price reduction by the CCCC.
“Discussions on the cost will be held with the contracting parties and others involved in the project,” he added.
The federal government, he said, has also taken cognisance of the strong objection by the Selangor state government towards the ECRL project.
Section 20A of the Town and Country Planning Act 1976 states that the federal government needs to consult the state government before carrying out any federal project in the relevant state.
Lim noted that Selangor’s objection was principally based on its application to establish the 16 km-long Klang Gates Quartz Ridge, which is the longest of its kind in the world, as a UNESCO World Heritage Site.
Completing the Gombak-Port Klang link would guarantee the failure of the state’s application, he said.
He also said the federal government would enter into discussions with Selangor, only after a significant price reduction for the E CR L is obtained, alongside the merits of the ECRL venture as compared to the possible UNESCO World Heritage Site listing. — Bernama