CPEC: China expresses reservations before entering power purchase agreements

Ahsan Iqbal constitutes a working group to address the issues related to transportation of coal from Sindh to Punjab.

Shahbaz Rana July 12, 2014
CPEC: China expresses reservations before entering power purchase agreements

ISLAMABAD: As Pakistan is set to enter into power purchase agreements, extending over a period of 25 years with Chinese companies, the foreign power producers have expressed reservations over existing mechanisms that have led to the accumulation of a circular debt of over Rs300 billion.

During recent meetings with Pakistani authorities, Chinese investors displayed a sense of reluctance over non-resolution of circular debt, according to officials of the Ministry of Planning and Development.

An official told The Express Tribune that Pakistan and China will sign power purchase agreements on August 4 in Beijing. He further added that the government will give an upfront tariff to the power producers and in return the producers will be responsible for engineering, procurement and construction activities.

The officials said in order to allay concerns of Chinese investors, the government was also formulating special rules and regulations aimed at finding a way to avoid application of Public Procurement Regulatory Authority (PPRA) rules on these contracts. The PPRA rules are aimed at ensuring transparency in public contracts but often become hurdle in speedy implementation of agreements.

The meeting was chaired by Minister for Planning and Development Ahsan Iqbal and was attended by Punjab Chief Minister Shahbaz Sharif, Federal Minister for Water and Power Khwaja Asif and Secretary Planning Hasan Nawaz Tarar. It was decided to call Secretary Finance Dr Waqar Masood in the next meeting to get the views of his ministry, that is reluctant to acknowledge the circular debt of over Rs300 billion on its books.

This is not the first time the issue of payment modalities of power purchase agreements has come up. It was also raised during a meeting of Steering Committee on Energy Projects under China-Pakistan Economic Corridor (CPEC), chaired by Minister for Planning and Development Ahsan Iqbal.

Prime Minister Nawaz Sharif formed the steering committee after he found out that the activities of various ministries were not synchronised, which could delay implementation of energy projects initiated under Pak-China corridor.

The steering committee has been tasked to regularly review progress and find ways to remove obstacles that may hinder work on critical projects like integrated plan for generation, transmission and distribution and an integrated plan for transportation of coal across the country.

The problem of an obsolete transmission infrastructure has become severe during recent days, leading to long hours of load shedding across the country.

The steering committee will be dealing with a seven-point agenda that includes to review feasibility studies of energy projects under CPEC; demand and supply framework of ongoing and new projects, integrated plan for generation, transmission and distribution; payment modalities of power purchase agreements; curtailing power losses, integrated coal logistics plan for coal power projects and more importantly the Chinese investors concerns regarding security and PPRA rules.

Ahsan Iqbal added that CPEC was a key initiative which will help Pakistan in meeting its energy shortfall. He said China was keen to pursue the projects initiated under the corridor. However, the government has to deliver results according to strict timelines and work on full capacity to avail this histroic window of opportunity.

The minister for planning and development stated that during his recent visit to China the delegation sensitised Chinese authorities to prioritise Pakistan’s energy projects.

Under the corridor, the government plans to install a project of 6,600 megawatts at Gaddani Energy Park, Quaid-e-Azam Solar Power Park in Punjab , Karachi-Lahore Railways Project (ML-I) and coal-based power projects at Port Qasim.

Iqbal stressed on integration of work to bring about synergy and called for an integrated plan for coal logistics for energy projects and also directed the committee to address observations of Chinese authorities. He further added that the generation of electricity was not the only issue but transmission and distribution mechanisms were becoming major irritants.

The minister for planning and development also constituted a working group to address the issues related to transportation of coal from Sindh to Punjab.

Independent power producers have sent notices to the federal government, warning to call the sovereign guarantees if the Ministry of Finance did not clear the outstanding dues.


Me me me! | 9 years ago | Reply

@randhawa: You are suffering because your people don't want to pay the taxes. You think because you a Pak citizen everything should be free as long as you are living on your own soil. Water, Bread, Electric, Gas and Bread etc. Where in the world the Govt is going to bring money to buy power, Gas, Oil and Food for millions, how long poor people of Pak are going to donate their kids' food to you?

Humza | 9 years ago | Reply

@Frank: If you think 10 years of a failed dictatorship that gave the nation instability, terrorism and no energy are golden years, you should think again.

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