CPEC expansion plan in doldrums

China has not agreed to further expand cooperation in areas of energy, water management, climate change

Shahbaz Rana September 26, 2023



China has not agreed to further expand cooperation in areas of energy, water management, and climate change under the China-Pakistan Economic Corridor (CPEC), underscoring the challenges that both the sides are facing in deepening the economic ties.

Moreover, Islamabad gave up its opposition to setting up a new imported coal-fired power plant in Gwadar and also agreed to a number of Chinese demands to address Beijing’s concerns, the signed minutes of the 11th Joint Cooperation Committee (JCC) of the CPEC showed.

Although, the JCC meeting was held in Oct 2022, its minutes were signed on July 31, highlighting the difference of opinions on both sides that led to almost a year’s delay in reaching a consensus.

The details showed that China did not agree to a host of measures that Pakistan had proposed in the areas of energy, water management, climate change and tourism in Giglit-Baltistan (G-B), Khyber-Pakhtunkhwa (K-P), Azad Jammu and Kashmir (AJK) and the coastal areas.

The final draft shared with Beijing by Pakistan and the final minutes signed by both the sides were different in many ways. The CPEC minutes had been signed on July 31 during the visit of the Chinese vice premier, Ahsan Iqbal, former planning minister in the PDM government, said.

The JCC is a strategic decision-making body of CPEC and its 11th meeting was held virtually on Oct 27, 2022 on the insistence of the PML-N led government that wanted to showcase some progress.

China excluded cooperation in the areas of cross-border tourism in G-B, K-P and AJK and cooperation for promotion of coastal tourism from the final minutes of the 11th JCC, the details showed.

China also did not agree to Pakistan’s proposal for inclusion of Water Resources Management and Climate Change and Urban Infrastructure Development in the CPEC framework. The proposal for setting up a new joint working group on water resources management and climate change was also rejected by China.

When contacted, the Ministry of Planning stated that it was a global practice for the minutes of meetings between two countries to be signed by both the sides only after due consultation and evolving consensus. This is to ensure that the minutes accurately reflect the agreements and understandings reached by both the parties, it added.

The planning ministry further said that the 11th JCC meeting minutes were signed in July 2023 after a thorough consultation process. Both the sides reviewed and discussed the minutes in detail to ensure that they comprehended all these outstanding issues and future goals, it added.

The details showed that China excluded the issue of financial challenges being faced by the power companies from the final minutes. The text related to the financial closing of 701 megawatts (MW) Azad Pattan hydropower project, 1,124MW Kohala power plant, and 1,320MW Thar Block 1 Shanghai Electric Co power plant was dropped from the final minutes.

The draft minutes had mentioned that “the projects have achieved 90% milestones for financial closing; however, financial closing is dependent on Sinosure clearance”.

Major concession on Gwadar plant

Pakistan has given significant concessions to China on the issue of setting up the 300MW Gwadar Power Plant.

Islamabad wanted to either shelve the 300MW project or change its location to Thar to use the local coal. But China did not agree to Pakistan’s text about the Gwadar plant, which had mentioned that “both sides recognised that there was a need to examine the requirement, size, location and fuel type for 300MW Gwadar Power Plant in view of escalating international coal prices, which were resulting in exceptionally high prices of electricity, liquidity and foreign exchange issues for Pakistan and environmental concerns”.

Pakistan had also wanted the conversion of the imported fuel-based Gwadar plant to Thar coal to address energy security and liquidity issues to which China did not agree.

The final minutes showed that “both sides agreed to advance the Gwadar Power Plant in accordance with the existing plan”.

Pakistan also committed that it would follow the consensus reached by two sides, and will direct the Pakistani power purchase companies to stop deducting the capacity power rate and return the deducted power rate.

To ensure the normal operations of CPEC power projects, the Pakistani side promised to take necessary measures to ensure timely exchange to US dollars for CPEC power projects to buy necessary fuels.

China also did not agree to a proposal to the inclusion of a 500kv transmission line from Hub to Gwadar to link the seaport city with the national grid in the CPEC framework.

Similarly, China did not agree to “carry out joint studies for future development of Thar coal blocks, including development of mega power parks and power evacuation infrastructure, with a view to meet Pakistan’s energy needs from indigenous resources, conversion of coal into other products for domestic demand as well as exports.
The reference that the JCC appreciated the decision on the conversion of imported coal-based IPPS to local Thar coal was also dropped.

China also did not agree to the proposal for inclusion of 100MW KIU and 80MW Phander hydel power projects in the CPEC energy cooperation list and implementation through Chinese investors. China did not agree to the proposal of developing a policy framework for coal gasification to fertiliser projects based on Thar coal.

Similarly, there is no mention of the South-North gas pipeline project in the final minutes. The draft minutes had mentioned examination of feasibility study and Chinese cooperation for the purpose.

Pakistan had proposed Chinese participation in a strategic underground gas storage project but there is no mention of this mega project in the final minutes.

Pakistan had also proposed participation of China in the national seismic study for sedimentary areas and sought Chinese equipment. But this idea is also shelved at the bilateral level.

Pakistan proposed joint exploration, development, and marketing of metallic minerals and sought Chinese technology, but the final minutes were silent on this issue too.

The planning ministry emphasised that signing of the minutes of the 11th JCC meeting was a testament to the strong relationship between Pakistan and China. It was also a reflection of the commitment by both sides to work together to achieve their common goals, it added.


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