Govt shuns plans to renegotiate $15b energy projects

Pakistan, China holds 10th JCC meeting through videoconference

ISLAMABAD:

Islamabad on Thursday committed with Beijing that it would not reopen $15 billion deals of energy projects under the China-Pakistan Economic Corridor (CPEC), as both the nations also agreed on new areas of cooperation to deepen strategic economic relations.

With Pakistan’s written assurance to China, the chapter opened by the government of Prime Minister Imran Khan on reducing power tariffs and withdrawing tax concessions given to the Chinese energy projects seems closed now.

The consensus was reached during the 10th meeting of the Joint Cooperation Committee – the highest decision making body of the CPEC -- which finally met nearly after two years.

The meeting was held through videoconference and co-chaired by Asad Umar, Minister for Planning and Ning Jizhe, Vice Chairman of the National Development and Reform Commission (NDRC) of China.

The Pakistani side is committed to maintaining the tax and tariff policies stable and establishing a more standardised and facilitating power market in Pakistan, according to the decision of the JCC.

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The tariff reduction negotiations with China have to be seen in the context of exceptionally cordial relations between both the countries, Umar said while addressing a press conference after the JCC meeting.

The PTI government in the past had announced plans to renegotiate the power tariffs and return on equity given to Chinese investors of the energy projects. It also wanted to seek a rollover of the $3 billion maturing Chinese repayments.

So far, 10 energy projects worth $10 billion have been completed and four projects costing $4.7 billion are under implementation. The government wanted to renegotiate terms of these schemes.

Pakistan also assured China to disburse $1.4 billion or Rs230 billion payables of the Chinese power plants on account of power generation cost that has been stuck up in the vicious circular debt cycle.

Pakistan had committed to open a revolving fund that would have deposits equal to 21% of the power generation cost. But the commitment was never honoured.

China on Thursday hoped that the Pakistani side would get the article related to the revolving account on the ground soon.

Umar said the ministries of finance and energy were working on a path to resolve the issues of overdue payments of the CPEC energy projects and the revolving fund.

The minister said about $1.4 billion or Rs230 billion were payable to the Chinese power plants and a solution would soon be found to it.

The JCC also approved the decision of inclusion of 700.7 MW Azad Pattan HPP and exclusion of RY Khan 1320 MW project from the CPEC framework.

Both sides agreed that the remaining 600MW Zonergy Projects at Quaid-i-Azam Solar Park will be implemented, in accordance with Pakistan’s generation planning, by means acceptable to both sides.

Pakistan and China also agreed to include new areas for cooperation under the CPEC framework.
Both the countries agreed to carry out a joint study for future development of Thar Coal blocks with a view to meeting Pakistan’s energy needs, conversion of coal into other products for domestic demand as well as exports.

China offered support for a plan for oil and gas sector development. For Thar Coal Gasification to Fertiliser Project, it was decided that the Pakistani side would prepare a policy framework to bring this technology to the country.

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The Chinese side noted the progress on the North-South Gas Pipeline Project and offered support to carry out related actions under the framework of the development plan for the oil and gas sector of Pakistan.

For Strategic Underground Gas Storages, the government is planning to develop underground gas storages to ensure uninterrupted supply of natural gas.

The Pakistani side invited technically capable and financially sound Chinese companies in the exploration, development and production of metallic minerals.

Both sides agreed to continue cooperation in areas including Emerging Technologies Maritime sector, Mines and Minerals (Oil & Gas), Tourism.

Chinese concerns

Regarding Sukkur-Multan (M-5) project, the Chinese side expressed concerns about the deductions by the Employer unilaterally, the non-payment of remaining 50% of retention money and deductions from the works already completed and claims.

After detailed deliberations, both sides agreed that Employer’s and EPC Contractor’s issues shall be expeditiously resolved as per provisions of contract.

ML-I project

Both the countries agreed that financing negotiations of the Mainline-I project of the CPEC would focus on package-I, whose five sub-projects had been confirmed. The two sides agreed to make efforts to reach agreement on the terms of financing in a timely manner.

Discussion on ML-I is an ongoing process and issues like loan currency mix and interest rates remain unresolved, Umar said.

Both the sides agreed that the DI Khan-Zhob project was on high priority list and the loan request forwarded by the Pakistani side on the new format would be positively considered by China.

The JCC agreed to take the realignment of KKH from Thakot to Raikot Projects as one of the short-term projects instead of the Thakot-Raikot N-35 remaining portion and advance the realignment as a priority.

It was decided that the Pakistani side will process loan requests for Chitral-Shandoor-Gilgit (369km) project for consideration of the Chinese side. They decided to deliberate on Mirpur-Muzaffarabad-Mansehra (MMM) project after the approval of its PC-1.

It was agreed to discuss Peshawar-DI Khan Motorway and Dir-Chakdara Motorway after approval of their PC-1s by Pakistan.

Pakistan proposed to include Chitral Chakdara M-1 (Swat Motorway) as part of CPEC Western Corridor.

The Chinese side agreed to consider it after the submission of the project proposal. Both the sides agreed to implement 300MW Coal-fired Power Plant in Gwadar as soon as possible.

Also read Talks begin to roll over $3b CPEC debt

In order to encourage the substantial commencement of the project and put it into commercial operation at the earliest, Pakistan and China agreed to jointly create favourable conditions for project financing.

Considering the impact of the Covid-19 pandemic, the extension in financing closing date and the commercial operation date will be evaluated.

Security cooperation

Pakistan and China reaffirmed that a secure environment was vital to the development of CPEC. The two sides agreed that under a significantly evolved regional security environment, threats had complicated security challenges confronting CPEC.

Our learning from the Dasu attack is that Pakistan has to provide a kind of security to non-CPEC projects that is available to the CPEC scheme, said Umar.

Both the sides strongly condemned recent terrorist attacks targeting CPEC projects.

Pakistan and China signed an MOU for the establishment of a Joint Working Group (JWG) on information technology.

The most exciting development of the 10th JCC is the decision to set up an information technology joint working group, as IT is tomorrow’s economy, said Umar.

Letter of Exchange of Provision of Balochistan Solar Power Lighting Equipment and Provision of Medical Equipment and Material were also signed.

The JCC also announced the signing of MoU on Karachi Coastal Comprehensive Development Zone (KCCDZ) and Agreement of Cooperation Framework between Ningbo Port and Gwadar Port as well as Lease deed of Gwadar Expo Centre.