Wednesday, July 10

CPEC and changing nature of energy projects in Pakistan

China-Pakistan Economic Corridor (CPEC) has been instrumental in drastically decreasing the energy deficit in the country. Its power projects have been simulating industrialization, further increasing export volumes.

Its numerous wind, solar, and hydro-power projects have been making a difference in the life of millions of people, due to which the span of load-shedding has been substantially minimized. Thus, these are development-oriented and not responsible for any kind of circular debt trap.

Most recently, Khalid Mansoor, Special Assistant to Prime Minister (SAPM) on CPEC Affairs under the previous regime, had reconfirmed that power generation projects are in line with the country’s growing needs and not over and above the national requirements, which are being propagated to be the primary cause of circular debt trap and capacity payment issues. He further clarified that globally 30-35 per cent surplus power is a critical prerequisite to ensuring sustainable and uninterrupted power supply.

Unfortunately, the federal government had again failed to decide on making payments to the tune of Rs230 billion to Chinese power plants operating under the CPEC project. Under the 2015 energy framework agreement, Pakistan is contractually bound to make timely payments to the Chinese power plants set up under the CPEC framework. But hopefully, it will be settled amicably, and CPEC Phase-II will be started very soon.

The SAPM believed that the power generation was increased by the previous government, considering the country’s expanding industrialization needs. He upheld that all the projects were set up according to the NEPRA policy.

He strongly rejected the allegations of corruption and kickbacks in the power projects and termed them all transparent and open. He said that now the country has adequate surplus power, which should be diverted to the Special Economic Zones (SEZs). We are persuading the Chinese in particular and other investors in general to utilize the vast incentives, including fiscal ones, being offered in the SEZs to turn the country into a vast industrial hub, he added. He further dismissed the impression of any souring of relations between the two iron brothers – Pakistan and China.

On the other hand, Pakistan has amicably extended project completion deadlines of five Chinese power plants having a generation capacity of 3,600 megawatts. In this connection, the commercial operations dates of 884MW Suki Kinari Hydropower Project, 720 MW Karot Hydropower Project, 330MW Tel project at Thar block-II, 330MW ThalNova Thar Block-II and 1,320MW Thar block-I have now been extended.

The decision was communicated during the 4th Pak-China Relations Steering Committee meeting, chaired by Planning Minister Asad Umar. The ongoing projects under CPEC and the issues being faced by their investors were discussed in detail in the forum. The Power Division Secretary informed the meeting that the issue of commercial operation date (COD) extensions for five power projects had been resolved.

Unfortunately, the projects are falling far behind the dates of commissioning agreed between the government of Pakistan and Chinese investors due to many complex and complicated reasons, mainly COVID-related delays and strikes at some projects.

The Steering Committee shared that an initial 132 KV line is being built to provide electricity from the national grid to meet Gwadar’s electricity demand. In addition, the provision of solar panels to 3,000 households in Gwadar and other short-term measures are also being initiated to ensure an additional supply of electricity to the city. Thus, the energy requirements of Gwadar will soon be matched. In this context, the Committee was informed that work on some sections of another CPEC project Quetta-Zhob Road project, had been halted due to a stay order from the Islamabad High Court.

However, many Chinese companies have once again complained that the process of work visas has not been smooth, and workers had to apply for business visas, which resulted in the imposition of penalties and banning of entry of Chinese citizens to Pakistan. They said that about 90,000 Chinese visa applications were pending a decision which should be resolved on a priority basis.

To resolve this issue, the Planning Minister under the previous regime, Asad Umar, had asked the Ministry of Interior to coordinate with Chinese companies operating in Pakistan. He suggested that the companies’ letters may be demanded as proof for work visas to resolve the problems.

Furthermore, the Ministry of Planning said that issues related to industrial cooperation were also discussed in the said meeting. The Industries Department of the Government of Punjab briefed the Committee on the steps taken to resolve the investors’ pending issues. It was also shared that the process for the appointment of the Faisalabad Industrial Estate Development and Management Company (FIEDMC) CEO would be completed as soon as possible. The board of the company has already been reconstituted.

The meeting was further informed that due to the non-resolution of many issues, over $900 million in Chinese investment in Special Economic Zones could not materialize fully. For instance, the Easy Prefabricated Private Limited Company has paid for electricity and gas connections, but the services have not been provided yet.

Similarly, La He Trading International Private Limited has manufactured electric bicycles and tricycles, but their products cannot be brought on the road due to the absence of road policy. The company was also facing issues in securing loans from the banks due to a lack of land entitlement.

The Snow White Lavation Private Limited applied for allotment of land in Allama Iqbal Industrial City over four months ago but did not get any response from the government of Punjab. Other Chinese companies have been facing problems in getting electricity and gas connections in these zones for months.

It can be concluded that for further streamlining, easy and smooth completion and functioning of ongoing CPEC projects, both countries, all main stakeholders and private companies should chalk out a comprehensive future roadmap to mapping out all the pending issues hindering inflow of FDIs in the country. More focus should be given to green technologies, especially in the SEZs in the country. Intensified hydro-power generation is the need of the hour which would be a game-changer for cheap energy supplies in the days to come.

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