Rs1tr China-funded project okayed
The ECNEC meeting approved seven projects worth Rs1.2 trillion in total, including a revision in a World Bank-funded project that had begun four years ago. PHOTO: AFP
Pakistan pushes through the approval of a Rs1 trillion China-funded Chashma nuclear power project on Thursday, aimed at generating 1,200 megawatts of electricity, without first securing necessary initial tariffs and other approvals.
The Executive Committee of the National Economic Council (ECNEC) approved the project of Pakistan Atomic Energy Commission (PAEC), known as “Chashma Nuclear Power Project Unit-5 (C-5),” at a cost of Rs1.05 trillion, according to the Ministry of Finance.
The project will be built with Rs187 billion of foreign exchange component and a Chinese supplier credit of Rs820.7 billion or $2.9 billion. The project will be constructed outside the Public Sector Development Programme (PSDP) by securing a $2.9 billion Chinese loan.
However, the government did not complete all the modal formalities before giving approval to the Rs1.05 trillion scheme.
Just a day ago, the project’s Central Development Working Party (CDWP) meeting was held, in which the forum directed to get the mega scheme approved as a strategic project from the federal cabinet. The CDWP also instructed to secure inclusion of the project in the Indicative Generation Capacity Plan (IGCEP), which was prepared with input from the World Bank.
At the time of the CDWP endorsement, there was no feasibility study and no engineering procurement and construction level tariff for the project, as shown in the documents.
The summary tabled by the Secretary Planning before the ECNEC stated that the PAEC will get the project declared as strategic by a competent forum and its inclusion in the IGCEP, in line with the directions stipulated in the National Electricity Policy of 2021.
The summary further noted that the PAEC will also obtain feasibility and the EPC stage tariff for the project from the National Electric Power Regulatory Authority (NEPRA), as per the ECNEC decision of 2020.
There is also an issue of providing close to Rs1 trillion sovereign guarantees to the C-5 project. Since the IMF has capped the maximum guarantees limit to Rs4 trillion, the government does not have enough space to provide full cover for the Chinese loan. It was decided that the Rs1 trillion sovereign guarantees will be provided in a phased manner and will be linked with the retirement of other sovereign guarantees.
The original PC-I of the project had been submitted at a cost of Rs492 billion in 2018. In December 2020, the PAEC had submitted another PC-I at a revised cost of Rs689 billion. Three years ago, the Planning Commission had raised objections over the cost of electricity generation and its impact on the country’s least cost generation plan.
In August 2021, the PAEC submitted a third PC with a new cost of Rs768 billion, but the Planning Commission had returned the documents with the observation to first finalise a National Electricity Plan in light of the National Electricity Policy. The Power Division was also asked to provide a policy on the strategic nature of projects like the Chashma-5 nuclear power plant.
All these instructions were not honoured by the PAEC during the past many years, and the project has been approved without fulfilling the requirements.
The ECNEC meeting, chaired by Federal Minister for Finance Ishaq Dar, approved seven projects worth Rs1.2 trillion in total, including a revision in a World Bank-funded project that had begun four years ago.
The Planning Commission submitted a project of the Federal Board of Revenue (FBR), named the “Investment Project Financing (IPF) Component of Pakistan Raises Revenue Project,” at a cost of Rs21.6 billion or $80 million.
In 2019, the World Bank had approved a $400 million project with the aim of broadening Pakistan’s narrow tax base and enhancing the very low tax-to-GDP ratio. After four years, the tax-to-GDP ratio has further fallen, and the World Bank has to be equally blamed for giving money for activities that do not require foreign funding.
Out of the $400 million, $80 million or Rs12.6 billion at that time had been allocated for upgrading the FBR’s outdated information technology system. The ECNEC approved a revision of the $80 million component, which at today’s exchange rate would hand over Rs21.5 billion to the FBR.
Out of the additional Rs8.8 billion, the government on Monday approved over Rs2 billion allocations to buy 155 vehicles for the FBR in a phased manner. The ECNEC also extended the project completion period from end 2024 to end 2025, which shows the failure of the $400 million WB funded project.
The ECNEC decided that the vehicles would be procured after the end of the current austerity period in June next year, and it has also defined the specifications.
The ECNEC approved the Dualization of Rawalpindi-Kahuta Road at a revised rationalised cost of Rs23.5 billion, which is 81% higher than the original cost of the project.
The ECNEC revised the project Infrastructure Up-gradation of Karachi Shipyard and Engineering Works (KSEW) and approved it at a cost of Rs10.7 billion, which is Rs8 billion higher than the originally approved estimates. The project envisages renewed underwater repair capability and concrete rehabilitation works for the restoration of existing two dry docks for ships/submarines.
Published in The Express Tribune, July 28th, 2023.
Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.