Power import: Amidst sanctions, govt finds way to clear Iran dues

Officials say KASB Bank to assist in payment of $50 million to Tehran, KASB denies.

Zafar Bhutta November 07, 2012


The government has found a way to carry out banking transactions with sanctions-hit Iran with the assistance of KASB Bank that will help clear $50 million dues of Tehran for supply of electricity to Balochistan, according to sources.

Pakistan finds the middle ground in the backdrop of economic blockade imposed by the United States and European Union on Iran for its alleged nuclear power programme. Tehran insists its power programme is extremely peaceful.

The proposed payment mode will be tabled in a meeting between officials of Pakistan and Iran during visit of Iranian Vice President to Pakistan, sources say.

The two sides will also discuss additional import of 100 megawatts of electricity. They have already signed a memorandum of understanding (MoU) for supply of 1,000MW of electricity to Pakistan.

At present, Iran is exporting 74MW per day to the border areas of Balochistan as well as Gwadar, but Pakistan has not been able to carry out banking transactions with Tehran since June 2011 after the US and EU intensified sanctions. The outstanding amount has now grown to $50 million.

According to the sources close to a recent meeting where the KASB proposal was on the agenda, the State Bank of Pakistan (SBP) has endorsed the proposed payment mode for power imports from Iran.

Owing to the sanctions, no Pakistani bank having branches abroad is willing to carry out financial transaction with Iran because of fears of a backlash against branches abroad, with the possibility of their forced closure.

“As KASB Bank has no overseas branches, it has offered its services for payment of dues to Iran,” a source said.

Sources pointed out that the National Transmission and Dispatch Company (NTDC) had finalised payment arrangements and a proposal in this connection would be submitted to its board of directors for approval.

When contacted, Abid Aziz Merchant Group Head – Operations, FI and Trade KASB Bank denied any proposed payment mode and said that they had made no offer of making transaction through their bank for power import from Iran.  “We have proposed no such arrangement to NTDC,” he said.

Earlier, the Iranian company that was exporting electricity had threatened to stop power supply because of delay in clearing its dues.

“Now the plan is ready to clear the outstanding amount and it will be discussed with Iranian officials in a meeting in Islamabad,” a government source said.

Iran has been exporting electricity through a 132-kilovolt transmission line. In 2006, Pakistan had been importing 39MW, which was later increased to 75MW.

Under the 1,000MW power import project, Iran will build a powerhouse in its Zahedan province bordering Pakistan to generate electricity for export and has also expressed its willingness to provide a loan of $800 to $900 million for the project.

A 700km transmission line of 500 kilovolts will also be laid from the Pak-Iran border to Quetta.

Iran has also expressed interest in setting up a 200MW power plant in Balochistan near the border. In addition to it, Tehran is also keen on installing smaller plants of 25MW each on the ground as well as on barges to help Pakistan overcome the prevailing power crisis.

Published in The Express Tribune, November 8th, 2012.



HH | 8 years ago | Reply

KASB Bank Ltd CEO has resigned under pressure from SBP. It is rumored that the mentioned Group Head has also been "asked" to resign.

Cautious | 8 years ago | Reply

Interesting that Pakistan didn't come up with this method until Iran said it was going to stop delivering power - one might think you (like some others) were using the USA as a convenient excuse for not paying what you owe.

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