ISLAMABAD: Ministry of Foreign Affairs (MoFA) has reportedly opposed alteration in IPPs’ revised agreements of 2019 on a foreign country’s demand, saying that by raising prospects for re-opening already signed agreements with the government, in the wake of a ‘leaked’ report, would raise apprehensions in business circles and amongst prospective investors, well informed sources told Business Recorder.
Sharing the details, sources said, in a meeting with the Chinese Embassy, Ministry of Foreign Affairs followed up on the Prime Minister’s conversation with the Chinese Ambassador.
The Chinese side said the relevant Chinese enterprises had analyzed Pakistan’s energy needs for the winter months and prepared some data/ analyses. This information been shared with Power Division, the Ministry of Planning, Development and Special Initiatives, and the PMO.
The sources said, initial consensus had been reached to operate CPEC coal-fired IPPs at full capacity, as LNG-based power would be quite expensive. At the same time, both sides needed to remove certain obstacles to the smooth operation of CPEC power plants. These included payment arrears, limits on foreign exchange transfers and revolving accounts.
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On establishment of revolving account for CPEC IPPs, China has noted that, during a recent ECC meeting, Pakistan had approved renaming “revolving fund” to “revolving account,” which was in compliance with the terms of the inter-governmental agreement.
The sources said, in the next step, it would be important for the revolving accounts’ establishment to be recognized not only by project sponsors and financial institutions, but also enshrined by the governments of Pakistan and China.
During discussion, it was noted that coal-fired power plant at Gwadar had been lagging for several years due to one reason or another.
According to sources, China could understand Pakistan’s concerns about rising coal prices and limited foreign exchange. However, redesigning the project to run on Thar coal would make it an entirely new project. It could run counter to Chinese President Xi Jinping’s policy pronouncement that China would not undertake any new coal-fired projects abroad.
There were numerous practical considerations for following the original plan as Pakistan’s proposed alternatives may not be able to meet Gwadar’s power needs effectively. Firstly, imports from Iran could not be stable, and would make both sides dependent on a third party. Secondly, a transmission line from Hub would raise security risks, with any attack taking several weeks to repair. Thirdly, solar panels could never entirely replace a stable power source. If Pakistan could guarantee consistent supply of coal from Afghanistan, it would most likely be acceptable.
The project sponsor had already indicated to the Private Power Infrastructure Board (PPIB) that in the worst case scenario, if the project were abandoned compensation to the company for the costs already incurred could run to $90 million. This would not be a win-win situation.
In the run-up to his visit to China, the Prime Minister Shehbaz Sharif had decided to stick to the project’s original plan. It was; however, taking time to translate the Prime Minister’s instructions into action.
The sources said, China hoped Pakistan would appoint a focal point to follow up and coordinate the smooth implementation of the power plant.
Discussing review of IPPs 2019 report, China understood that the so-called IPPs report was never published by the Government of Pakistan and thus had no legal standing. It had; however, been leaked to the media and circulated widely.
The relevant officials within the Government of Pakistan were; therefore, wary of the report’s impact. They feared that any accommodation or flexibility on their part would be treated as corruption by Pakistan’s watchdog agencies.
“If considered appropriate, Pakistan’s experts could look at the report’s data, methods, and findings to evaluate its claims one by one. If the report’s contents withstood scrutiny, it could be taken constructively. It was only when things were exaggerated that we encountered problems,” the sources quoted Foreign Ministry as saying.
Chinese enterprises had already provided their detailed comments on the report’s contents. Moreover, by raising prospects for re-opening already signed agreements with the government, the report had given rise to apprehensions in business circles and amongst prospective investors,” the sources added.
Copyright Business Recorder, 2022
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