MUZAFFARABAD, March 23: Negotiations between the Earthquake Reconstruction and Rehabilitation Authority (Erra) and the Chinese companies on a commercial contract to pave way for the early execution of much-hyped $347 million Muzaffarabad City Development Project (MCDP) appear to have reached an impasse, causing disquiet among the residents of the quake-ravaged town.

However, sensing the uneasiness of survivors, the authorities in Islamabad and Muzaffarabad have jointly decided to immediately launch six projects, identified to be executed on priority basis under the MCDP from internal resources, a senior official told Dawn.

“We have been compelled to take this step because the Chinese companies are not coming to terms as yet,” said the official, seeking anonymity.

The contract between the Erra and the Chinese companies was to be signed in accordance with a loan agreement between Islamabad and Beijing after the latter had pledged in November 2005 a $300 million soft loan at 1.5 per cent interest rate.

A Memorandum of Understanding (MoU) was signed between the Erra and the two Chinese companies in September last year and though it was decided on the occasion that the ground-breaking of the first package of the project would be held in the first week of October, nothing could be initiated on the ground due to disagreement over the percentage of profit.

The Chinese companies were seeking 35 per cent of the cost of each project as profit, whereas the Erra wanted the profit to be slashed by at least 10 per cent. On the other hand, the Chinese companies had shown willingness to reduce the profit by three per cent only.

The stalemate created apprehensions among the residents, already irritated by the inordinate delay in reconstruction related activities in the town.

Sources said one of the two Chinese companies had also demobilised its staff from Muzaffarabad, while the other has retained skeleton staff although it had only recently acquired on rent nearly 103 kanals on the outskirts of the AJK capital to establish its camp office.

“The negotiations between the Erra and Chinese companies are going on but I admit there is no positive progress. Both sides are sticking to their guns,” said Dr Asif Shah, director general State Earthquake Reconstruction and Rehabilitation Agency (Serra).

Sources said that early this month, the Erra pulled out six identified projects from the MCDP list and asked the National Engineering Services of Pakistan (Nespak) to design them within one month so that they could be to advertised for execution by the reputed contractors.

These projects included construction of a shopping complex at Bank Road, widening of the CMH Road, establishment of Langarpura Satellite Town, widening of the Tahli Mandi Road and construction of multi-storey parking plaza at Upper Adda.

The Erra had also made an allocation of Rs2 billion for these projects in the on-going fiscal year from internal resources.