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The Transport Ministry and Finance Ministry have approved in principle building a rail line to Eilat. A NIS 500 million planning phase will start this year with the aim of completing the project by 2008 to ferry passengers and cargo between Ashdod port and Eilat. The project involves upgrading the Dimona to Nahal Zin line and building a 175-km Nahal Zin to Eilat line.

Finance Minister Benjamin Netanyahu, Transport Minister Avigdor Lieberman, and minister in the treasury Meir Sheetrit accepted the conclusions of the American company MTG (Mercator Transport Group) that operating revenues would balance the capital invested in the line, they announced at a Jerusalem news conference.

The ministers also decided to ask the treasury budgets director to draft a proposal to fund the project, to appoint an interministerial committee to put together an operating format, and to submit the project to the cabinet on completion of an engineer's plan and an updated cost estimate.

Detailed planning would take a year, and implementing it three years, Netanyahu told reporters. However, government sources predicted there would be delays because of topography and the need to relocate some existing infrastructure.

The Eilat project will cost $858 million, according to MTG projections, including $561 million for a cargo line and $297 million for a passenger line. Projected revenue for the cargo trains is $549 million over a 30-year period, according to an MTG feasibility study.

MTG estimated the potential demand at 5.5 million trips a year - 3.4 million current vehicle users, 1.1 million current air passengers, and 1 million current bus passengers.

The figure includes trips from Eilat to Beer Sheva and points north, but not a projection of growth in regional economic activity, which is expected to expand by 20 percent.

Sheetrit said the line's long-term utility was beyond doubt and it would boost Negev development and connect the region to the country's center.

Eilat port should be privatized to make the line a competitive alternative to the Suez Canal, Lieberman quipped. He said the Rail Authority was looking into all aspects of the line within the city, including the possibility of a tunnel.

Lieberman also noted new openings - Ramat Hovav to Beer Sheva next week, Tel Aviv to Ben Gurion airport in September, and Bet Shemesh to Jerusalem in December.

Netanyahu said the Eilat-Ashdod line was a necessity since Eilat is destined to become a very large city flanked by suburbs. He said competition between rail cargo and Eilat port would be modest, but Israel would welcome Jordanian interest to discuss collaboration in railway cargo.