ISLAMABAD: On the occasion of the Prime Minister’s departure to Beijing, Pakistan has decided to make a bullet payment to finance infrastructure projects and obtain a commercial loan of $600 million to reduce the outstanding liabilities of Chinese power plants.
The Ministry of Energy is processing payments of Rs 70 billion, although the Prime Minister’s Office wants to pay at least Rs 150 billion.
The Ministry of Finance has released 225 billion rupees to the Ministry of Energy out of the subsidies given in the budget, which is intended to provide maximum capacity for payments to Chinese power plants, but no additional funds have been given and the Ministry of Energy was expected to remain within the approved limit. An energy ministry official confirmed payments of only 70 billion.
The Ministry of Finance released 70 billion in the form of arrears of K Electric, 100 billion in the form of advance subsidy claims and another 55 billion in the form of Azad Jammu and Kashmir subsidy. He expressed that at least 150 billion rupees should be released to Chinese power plants. As of the end of April, the arrears of Chinese power plants installed under the Economic Corridor stood at 506 billion rupees or $1.8 billion.
After his visit to Beijing, Deputy Prime Minister Ishaq Dar advised Prime Minister Shehbaz Sharif to pay at least 200 billion rupees dues of Chinese IPPs from now till July. This amount was released on the intervention of Deputy Prime Minister and Prime Minister. is being done.
The Finance Ministry had already informed the IMF that it has no plans to release more than the available financial space to CPEC IPPs.
The Prime Minister was keen on concrete progress on CPEC’s Main Line One project, Kohala Hydropower Project, Azad Patan Hydropower Project and expansion of Karakoram Highway during the visit which started today. Beijing is expected to receive a $600 million trade loan, which Chinese officials refused to grant over Pakistan’s non-implementation of the Energy Framework Agreement.
In January this year, China linked the approval of a new foreign trade loan of $600 million to an earlier agreement to provide loans to Chinese power plants. Asking for a dollar loan.
Under CPEC’s Energy Framework Agreement, Pakistan committed to collect an amount equal to 21 percent of invoices generated for electricity payments. This is the amount that the Pakistani authorities have failed to collect, which has increased the debt burden of the energy sector.
This arrangement was made to protect Chinese firms from revolving loans, but instead of establishing a fund, Pakistan opened the Pakistan Energy Revolving Account in the State Bank in October 2022 with an annual allocation of 48 billion rupees, with a maximum of 4 billion rupees per month. As a result, the debt of Chinese IPPs is now around 500 billion rupees.
Of the Rs 70 billion, a significant portion is being disbursed to CPEC’s Thar Coal project. Due to high liabilities, Chinese insurance company M/s Sinosure is also not giving new loans to energy projects in Pakistan, leading to Hydropower and Azad Patan hydropower projects have been affected.
Sources said that during recent talks with Chinese officials, Pakistan requested to show progress on these two hydropower projects, however, Chinese officials insisted on proceeding cautiously. Two power plants are listed.
The prime minister is also expected to sign an agreement for the construction of the 1,726 km long $6.7 billion CPEC Main Line-I project. However, according to sources, Chinese officials have advised Pakistan to start construction work on only the 182 km Karachi-Hyderabad section first. Its revised cost is now $1.1 billion, which can be borne by both China and Pakistan.
The Karachi-Hyderabad section will be constructed as per the original design i.e. 160 kmph with full fencing, unlike the rest of the track where the speed has been reduced to 120 kmph and fencing has been removed to reduce costs. Save. China has in the past raised the issue of the unsustainability of Pakistan’s gross public debt and its implications for the new $6 billion loan for CPEC’s Main Line-I railway project.
Sources said Pakistani authorities also want to get something like the $2 billion development on the Karakoram Highway section of Raikot Thakot. Chinese officials asked for some time to work out the modalities of the project. They added that China has asked to provide electricity to Gwadar and make the port city commercially viable.
Pakistan imports electricity from Iran to provide electricity to Gwadar, the jewel of CPEC. The prime minister is expected to assure the Chinese leadership that the Bisham incident, in which five Chinese nationals were killed, will not happen in the future. Open in Google Translate because of the move for Chinese conservation.
