Pakistan has decided to shelve a plan to set up an imported coal-fired power plant at Gwadar under the China-Pakistan Economic Corridor (CPEC) due to the high cost of imported fuel and its preference for local resources.
Sources told The Express Tribune that the government had also recently informed the sponsor of the project – China Communications Construction Group (CCCG) – about its decision. The company had planned to set up the plant at a cost of $542 million.
Planning Minister Ahsan Iqbal has asked the authorities concerned to suggest alternative options that will be offered to the sponsor in lieu of the imported coal-based power plant, according to the sources.
The authorities have been asked to conduct feasibility studies in order to find alternative options. The decision marks a departure from the commitment that Pakistan gave to China in February this year. Pakistan had agreed to include the 300-megawatt Gwadar power plant in its highest priority schemes for the payment of invoices after commissioning of the project.
The government also agreed to include the much-delayed power plant in its highest priority schemes for the clearance of electricity dues in a bid to address the biggest concern of China.
The Gwadar power project was part of the early harvest schemes that had to be completed during the first phase of CPEC (2015-18). But it was facing delays after the Chinese insurance company refused to provide guarantees for loans due to payment problems being faced by other Chinese power projects.
Ahsan Iqbal discussed details during a pre-CPEC Joint Cooperation Committee (JCC) meeting held this week.
However, Pakistan cannot make any unilateral change in a project and it will have to place its decision before the JCC for endorsement, which makes strategic planning for CPEC.
Prime Minister Shehbaz Sharif is keen to hold the 11th JCC session before his upcoming visit to China, which is scheduled for the second week of November.
Sources said that the government was trying to hold the JCC meeting in the last week of October. However, like the previous JCC huddle, the meeting will again be held virtually. The government is considering offering the Chinese company to either set up the power plant on solar resources or shift it to Thar, according to the sources.
Read Third power plant launched on Thar coal
The Pakistan Muslim League-Nawaz (PML-N)-led government is lately promoting local coal after its decision to set up three CPEC power projects on imported coal eight years ago proved very costly. The Gwadar plant had been designed to provide electricity to the port city that faces 12 to 16 hours of load-shedding in a day and whatever electricity being supplied to it is imported from Iran.
Pakistan imports about 70MW of electricity from Iran, of which about 14MW are allocated to Gwadar.
Gwadar is not connected to the national power grid, which is another hurdle in the way of industrialisation. Shifting the plant to Thar indicates that there is not much demand for electricity by the industrial sector, which is yet to be fully established in Gwadar.
Sources said that the planning minister again suggested that the Ministry of Finance should expedite the process of opening a dedicated bank account to save Chinese projects from circular debt. The outstanding dues of Chinese power plants have been reduced to less than Rs240 billion after the government paid about Rs45 billion to the Chinese IPPs a few days ago.
These payments are part of the regular clearance of power generation cost and no preferential treatment has been given to the Chinese plants.
In order to address the issue of security of Chinese citizens and their assets, Pakistan has revised the security protocols, sources said. The decision was made during a meeting of the Joint Working Group on Safety and Security last month. However, the Ministry of Communications has raised concerns about the revised protocols.
Ahsan Iqbal instructed the Ministry of Science and Technology to complete procedural formalities for the signing of agreements with the Chinese authorities during the upcoming JCC meeting.
During a meeting of the Joint Working Group on Information Technology, both countries decided to set up six sub-working groups on communication technology infrastructure, application innovation, policy and regulation, HR development, cyber security and radio spectrum regulation.
Pak-China Technology Business Forum will be formally established during the JCC meeting.
It was decided that Pakistan would try to approve the revised PC-I of the Mainline-I project of Pakistan Railways before the upcoming JCC meeting.
The Ministry of Railways has submitted a revised cost of $10 billion, which is about 45% higher than the original price. But the Ministry of Planning has raised objections.
A major push will be given to the agriculture sector, as both sides are expected to sign new government-to-government and business-to-business deals during the upcoming JCC sitting. Pakistan will also request China for the transfer of technology.
Published in The Express Tribune, October 14th, 2022.
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