ISLAMABAD, April 05 (INP-WealthPK): The government has approved the construction of the Karachi Circular Railway (KCR). The project includes the transformation of the obsolete and old-fashioned KCR into a modern mass rail system that will deploy electric trains. The total length of the KCR corridor will be 43 kilometres and there will be 30 stations along the corridor. The construction of the KCR corridor, including its 30 stations and real-estate development on certain stations, would cost Rs273 billion. The project will be completed in three years following the financial close by the concessionaire. According to Public-Private Partnership Authority (P3A) spokesperson Saba Siraj, the authority’s board has approved the project. “The project will be financially viable once the government extends viability gap funding (VGF) because it is a green-field project and public transportation projects all over the world are subsidised.” The spokesperson said that the project was forwarded to the Risk Management Unit (RMU), which is supposed to approve the projects falling under the P3A law. The P3A spokesperson informed WealthPK that the risk-sharing profile of the project (risks shared between the public and private sectors) is close to any other public-private partnership (PPP) projects, which are implemented on build-operate-transfer (BOT) basis. “However, since it is the first urban mass transit project proposed to be implemented in PPP mode, the sheer size of the transaction makes it stand out from other PPP projects, which have been executed in other sectors, predominantly roads.” Responding to a query, the P3A spokesperson told WealthPK that the government/Pakistan Railways (PR) will provide capital VGF to the concessionaire to the tune of Rs86.5 billion. “However, the actual amount of VGF cannot be higher than Rs86.5 billion – which will only be determined at the bidding stage. Apart from providing funded financial support in the form of capital VGF, the government/PR will also provide the successful bidder foreign exchange risk cover, inflation (CPI) cover, and minimum revenue guarantee (MRG) cover for the first five operational years of the project.” According to WealthPK research, the per-kilometer KCR project cost comes to the tune of Rs4.7 billion. Karachi Circular Railway Management Company will be responsible for the oversight related to the project's execution, operation and maintenance.