In a statement today, Finance Minister Lim Guan Eng said the final cost is also not expected to cover the operating costs.
“Indeed, the project cost does not include the operating deficit, which cannot be determined for now. Furthermore, the Selangor government is also objecting strongly to the completion of the Gombak-Port Klang portion of the line,” he said.
The ECRL project was approved by the Cabinet on October 21, 2016, while the engineering, procurement, construction and commissioning agreement was signed with China Communication Construction Company (CCCC) the following November 1.
The scope was to build a line from the Integrated Transport Terminal (ITT) Gombak to Wakaf Bharu in Kelantan for RM46 billion.
On May 13 last year, the previous administration signed an additional agreement with CCCC for phase two, which was to extend the line from the ITT to Port Klang for RM9 billion.
Earlier, on May 3, the Cabinet approved the northern extension from Wakaf Bharu to Pengkalan Kubor for RM1.28 billion, followed on August 23 by another Cabinet approval to upgrade the ECRL to double-tracking which would cost an additional RM10.5 billion.
Based on this, Lim said the basic construction cost of 688.3 kilometres of line came to RM66.78 billion but the total cost will be RM80.92 billion after including land acquisition, interest, fees and other operational costs.
He explained that the costs could be divided into two components, namely development cost to include construction (RM66.78 billion), land acquisition (RM2.5 billion), working capital (RM50 million) and others (RM500 million).
Another component is the financing, which comprises interests (RM7.44 billion), sukuk coupon (RM3.19 billion), commitment fee (RM238 million) and management fee (RM216 million).
To date, the government via its wholly-owned operating subsidiary, Malaysia Rail Link Sdn. Bhd., had paid CCCC RM19.68 billion, comprising an advance payment of RM10.02 billion and progress payment of RM9.67 billion.
The advance payment was backed by an advance payment bond of an 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, said the statement.
“Based on the above facts and figures, as well as feasibility studies, we expect the ECRL 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.”
The federal government has also taken cognisance of the strong objection by the Selangor government towards the ECRL.
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 a 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 discuss with Selangor only after a significant price reduction for the ECRL is obtained, alongside the merits of the ECRL venture as compared to the possible world heritage site listing. — Bernama