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Govt puts major CPEC power project on hold

Updated January 14, 2019

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Hundreds of schemes under PSDP also face the axe. — File photo
Hundreds of schemes under PSDP also face the axe. — File photo

ISLAMABAD: The Pakistan Tehreek-i-Insaf (PTI) government has decided to shelve a major power project pushed by the Pakistan Muslim League-Nawaz regime under the China-Pakistan Economic Corridor (CPEC) and will axe hundreds of other schemes under the Public Sector Development Programme (PSDP) later this month.

Background discussions with government officials suggest that Islamabad has officially conveyed to Beijing that it is no more interested in the 1,320MW Rahim Yar Khan power project in view of sufficient generation capacity already lined up for the next few years. It has requested the Chinese friends to formally delete the project from the CPEC list.

Know more: Strategic confines of CPEC

During the 8th Joint Coordination Committee (JCC) meeting held last month, a Pakistani delegation led by Minister for Planning and Development Makhdoom Khusro Bakhtyar “proposed to remove the Rahim Yar Khan imported fuel power plant (1,320MW) from the CPEC list, in order to provide structure optimisation space for the subsequent power market of Pakistan”, said an official, quoting minutes of the Dec 20 JCC meeting.

Hundreds of schemes under PSDP also face the axe

The Chinese side suggested that a joint study on optimisation of energy mix be carried out at the earliest.

Also read: CPEC — govt seeks more joint ventures

The project was originally pushed as imported coal-based plant by Quaid-i-Azam Thermal Company of the Punjab government led by Shahbaz Sharif who used to attend meetings of the Cabinet Committee on Energy led by then prime minister Nawaz Sharif. A leading business tycoon had proposed the project and was expected to be one of the key sponsors.

The project was removed from the CPEC priority list when then bureaucracy highlighted that surplus generation capacity had already been contracted and more contracts would lead the country to ‘capacity trap’. The government had already notified a ban on capacity addition on imported fuels as early as June 2016 and the Rahim Yar Khan and Muzaffargarh coal-based plants were removed from the CPEC priority list. Among other reasons, this led to unceremonious removal of the then power secretary and head of the National Transmission Company — the system operator.

Take a look: The cost of CPEC

The Punjab government had pushed for revival of the plant which was included again in the priority list in subsequent CPEC negotiations, according to a federal secretary. It was not needed at all and would have been a burden on the already deteriorating financial condition of the power sector, he said, adding that Diamer-Bhasha dam was also included in the CPEC list when the coal-based projects were removed, but the dam project could also not move forward under the CPEC for unrelated reasons.

The official said the PTI government had already made up its mind to remove almost 400 “politically motivated” projects from the development portfolio as part of a comprehensive mid-year review of the PSDP later this month. Giving an example, the official said the last government had included hundreds of gas schemes in the PSDP and allocated funds even though there was no additional gas available for new connections. Many of these schemes could not take off.

“We are reviewing all such schemes in detail; we do not want to waste public funds where lien has been created or sufficient progress achieved, but we definitely don’t like to throw good money after bad,” a cabinet member told Dawn, claiming that more than 20 seats went to the PML-N in the last elections due to constituency politics of gas connections.

He said the mid-term review of the PSDP would be held in the last week of January and about Rs2 trillion worth of development projects would be revised. He said that most of the unapproved projects at the level of the Central Development Working Party or the Executive Committee of the National Economic Council and unfunded schemes would be excluded from the PSDP.

The cabinet member said that at least 400 projects included in the PSDP did not receive funding over the past four years and yet they were part of the programme. But he hastened to add that the Rs675 billion federal development budget approved by parliament in September this year would not be reduced further even though adjustments would be made where necessary to divert funds from problematic projects to more deserving ones for effective funding utilisation.

He said the PSDP used to get average Rs55bn additional funds over the past five years for development projects but most of them had not been given funds because the overall development portfolio expanded significantly. He said that all secretaries would be asked to provide unnecessary schemes under the respective ministries and divisions during the mid-year review so as to complete maximum projects in the minimum time period.

The federal government’s overall development portfolio stood at about Rs6tr and with the current pace, allocation of funds would take 9-10 years to complete even if no fresh development project was taken up, an official said. The PSDP size would remain unchanged at Rs675, but throw-forward would be significantly reduced through revision in the number of projects and their rationalised costs, he added.

Published in Dawn, January 14th, 2019