Hi Supun,
If you are looking for further ideas about refactoring, I have suggestions.
First, have a look at tbl_select.php, both in the QA_3_5 and the QA_4_0 branches, and see what kind of high-level calls have been left in this refactored script. Everything else went to functions. In this case, Atul also OOPed the code, which is only expected from you if you have time, as it's not part of your proposal.
All chunks of code having a common goal (see for example the "Bookmark add" section) should be extracted to sql.lib.php.
I was pretty sure you were aware of this, as your proposal plans to spend 6 weeks x 40 hours on refactoring sql.php.
Second, as discussed previously, your proposal says "The sql.php is a very large script and is also one of the central components in phpMyAdmin. As it is large it is hard to read and maintain. It needs refactoring and better integration with other scripts calling it."
So, all scripts that are including sql.php (for example db_qbe.php) should probably be including a library file then call a high-level function. Hint: sql.php's main job is to deal with $sql_query.