Construction will start next month on the first privately-funded railway project in Southwest China's Sichuan Province.

Located in Pengzhou, a city administered by Sichuan's provincial capital Chengdu, the Pengzhou-Bailu Railway is being built under the BOT (Build, Operate and Transfer) scheme which encourages the use of private funds.

The builder, the privately-owned Sichuan Dezhong Investment Construction Co, will own the right to operate the railway for 30 years before transferring it to the provincial government, said Jiang Wenlong, an official with the Sichuan Provincial Development and Reform Commission.

Since 2005, the Ministry of Railways has welcomed social funds to invest in railway construction. BOT, used in infrastructure construction globally, has been used in a few local railway projects, said a ministry official who declined to give his name.

But he said BOT would not become a major investment channel in the railway sector.

"It is because building a railway is very costly, and the returns, though stable, takes a longer time than other infrastructure projects," he said.

The Pengzhou-Bailu Railway will be 29 kilometers long and cost 420 million yuan (US$55 million). It is expected to be completed by next January, said Lai Zheng'ao, chairman of the Sichuan Dezhong Investment Construction Co.

The company's decision to build the railway is based on the return expected. It will serve the Sichuan Yadong Cement Co, and the 800,000-ton ethylene and 10 million-ton refinery project in Pengzhou, Lai said.

The Sichuan Yadong Cement Co is the largest Taiwan-invested project in Sichuan costing US$350 million. Construction of the project consists of three phases. Last year saw the completion of the first phase and the launching of the second. When the second phase is completed next year, the company will rely on the Pengzhou-Bailu Railway to transport 4.6 million tons of cement a year, Lai said.

"We can recoup our investment within six to seven years," Lai said.

(China Daily March 15, 2007)