Govt probes management of Jamshoro project

Power Division will hold internal inquiry and submit report to CDWP within three months

Zafar Bhutta September 19, 2021


The government has initiated an inquiry over poor management of the financing for execution of 2 X 660MW Jamshoro coal-fired power project.

The Ministry of Planning, Development and Special Initiatives informed the Executive Committee of National Economic Council (Ecnec) on September 10 that the project was considered by the Central Development Working Party Meeting (CDWP) in its meeting held on June 16, 2021.

The CDWP considered the Power Division’s request and decided that a summary/position paper to Ecenc would be submitted, recommending the Power Division’s proposal for change in mode of financing of Rs21.5 billion as cash development loan (CDL), allowing Rs2.355 billion as CDL through technical supplementary grant during financial year 2020-21 against surrendered amount of the Power Division with the following recommendations.

It said that the Power Division shall reprioritise their allocation of Public Sector Development Programme (PSDP) for adjustment of remaining amount of Rs19.145 billion for Jamshoro project to reflect as CDL during the upcoming fiscal years

Secondly, Jamshoro Power Generation Company Limited/Power Division will hire the services of independent consultants for advising Power Division on the overall financial restructuring and management of the project.

Read Refinery policy and its partial approval

The Power Division will hold an internal inquiry for the delay in implementation and poor financial management of the project and submit the report to CDWP within three months.

The forum was informed that CDWP approved the project with the above three conditions. It was observed that the requirement of Rs19 billion may be arranged through internal reallocation.

The Power Division informed that there is hardly any financial space for reallocation of allocated amount. It was informed that the project is feasible for bank financing but due to circular debt issues, banks are not willing to finance it.

The chair stated that option of such financing shall be explored after discussion with the banks.

The Ecnec considered the summary submitted by the Ministry of Planning, Development and Special Initiatives titled ‘Cash Development Loan to Jamshoro Power Company Limited (JPCL-GENCO-I) for 2 x 660MW coal-fired power project’ and decided that the Power Division shall process the case, in consultation with the Finance Division, for arrangement of financing facility for the project from the National Bank of Pakistan/other commercial banks as front Iending measure. This funding shall be then back loaded through next year’s PSDP.

Construction Dir Motorway

The Ministry of Planning, Development and Special Initiatives also gave a briefing on the Dir Motorway construction and informed that the project was considered by the CDWP in its meeting held on July 12, 2021 and was recommended for consideration and approval of Ecnec at total cost of Rs38.991 billion only for the purpose of seeking financing under the China-Pakistan Economic Corridor (CPEC) framework with the following conditions,

Firstly, the federal government will not provide any funds for the project through its PSDP or any other federal resources.

Secondly, in case financing under CPEC is confirmed, the repayment of Ioans and all associated charges will be the responsibility of sponsors of the project ie government of Khyber-Pakhtunkhwa.

In case the project is to be implemented on PPP basis, the K-P government will seek approval from its competent authority established for PPP projects and no viability gap funding (including land acquisition cost) will be provided by the federal government.

Read more CCOE gives approval for refinery policy

In the scenario of PPP modality, a proper financial model on authentic data will be developed by the K-P government.

The K-P finance minister informed Ecnec about the benefits of the project and highlighted the potential of tourism and resulting economic activity due to the project.

The chair enquired about the assumptions used in calculating Economic Internal Rate of Return (EIRR) of the project. The K-P P&D secretary responded that EIRR was calculated in the NESPAK feasibility study.

The provincial finance minister stated that the project will open up great opportunities of tourism for the area. He stated that the tourism potential can only be achieved if a clear strategy along with a financial package is announced to develop hotel and allied industries.

The finance minister observed that the Ministry of Planning, Development and Special Initiatives should, in future, present assumptions for EIRR as well as financial rate of return of such projects.

Ecnec considered the summary for construction of Dir Motorway and approved the proposals along with the conditions/observations of CDWP.

Published in The Express Tribune, September 19th, 2021.

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