Power deal with China: Govt balks at plea for special payment guarantees
Beijing had requested special reserve fund for its investors
Hours before a high-level delegation is set to leave for China, Islamabad has turned down Beijing’s demand for extraordinary payment guarantees to protect its investment in the power sector.
The move follows Beijing’s reluctance to sign power purchase agreements due to the government’s inability to resolve the circular debt issue.
The decision to treat the Chinese investors at par with other investors was taken in a meeting of a Committee constituted by prime minister to resolve issues related to China-Pakistan Economic Corridor Power Projects.
Officials revealed that Beijing had requested a special reserve fund for its investors to pay them within 30 days of power purchase. The move was designed to stave off circular debt.
“The Committee was of the view that framework of investment in the power sector under the current power policy provides adequate guarantees for domestic and foreign investors on the basis of a level playing field,” a handout issued by the Ministry of Finance stated.
Officials further revealed the committee also rejected the demand of Chinese investors to waive off duties on imported coal that will be used to run the power plants. China is also demanding tax rebates, which is not acceptable to the government, they added.
The decision came hours before a Pakistani delegation is set to leave for Beijing to discuss the modalities of power purchase agreements ahead of PM Nawaz Sharif’s visit to China. The delegation is expected to convince Chinese investors to bring investment under the present regime, said the officials.
Clarifying the government’s position, a senior official of ministry of finance said “Except once, we have never defaulted on our obligations, therefore Chinese investors should not worry about payments of power purchases.”
He said the circular debt was because of delay in payments.
Pakistan offers one of the best investment regimes in the world but chronic energy shortages, security problems and red-tapism has kept the foreign investors at bay. Under the present investment regime, both the investment in power sector and rate of return are protected. China plans to setup about 10,000 megawatt power plants in Pakistan.
Earlier in a meeting, safeguarding the investment by foreign companies similarly was the priority of the government, he added.
Assuring the Chinese investors of a conducive environment, the minister said his country would continue to pursue investor-friendly policies, adding that energy projects were the prime feature of the Pak-China Corridor and would be facilitated in every possible manner.
Published in The Express Tribune, October 18th, 2014.
The move follows Beijing’s reluctance to sign power purchase agreements due to the government’s inability to resolve the circular debt issue.
The decision to treat the Chinese investors at par with other investors was taken in a meeting of a Committee constituted by prime minister to resolve issues related to China-Pakistan Economic Corridor Power Projects.
Officials revealed that Beijing had requested a special reserve fund for its investors to pay them within 30 days of power purchase. The move was designed to stave off circular debt.
“The Committee was of the view that framework of investment in the power sector under the current power policy provides adequate guarantees for domestic and foreign investors on the basis of a level playing field,” a handout issued by the Ministry of Finance stated.
Officials further revealed the committee also rejected the demand of Chinese investors to waive off duties on imported coal that will be used to run the power plants. China is also demanding tax rebates, which is not acceptable to the government, they added.
The decision came hours before a Pakistani delegation is set to leave for Beijing to discuss the modalities of power purchase agreements ahead of PM Nawaz Sharif’s visit to China. The delegation is expected to convince Chinese investors to bring investment under the present regime, said the officials.
Clarifying the government’s position, a senior official of ministry of finance said “Except once, we have never defaulted on our obligations, therefore Chinese investors should not worry about payments of power purchases.”
He said the circular debt was because of delay in payments.
Pakistan offers one of the best investment regimes in the world but chronic energy shortages, security problems and red-tapism has kept the foreign investors at bay. Under the present investment regime, both the investment in power sector and rate of return are protected. China plans to setup about 10,000 megawatt power plants in Pakistan.
Earlier in a meeting, safeguarding the investment by foreign companies similarly was the priority of the government, he added.
Assuring the Chinese investors of a conducive environment, the minister said his country would continue to pursue investor-friendly policies, adding that energy projects were the prime feature of the Pak-China Corridor and would be facilitated in every possible manner.
Published in The Express Tribune, October 18th, 2014.