Pakistan and China are to discuss a financial mechanism for further financing of development projects in addition to projects falling under the umbrella of China Pakistan Economic Corridor (CPEC), well- informed sources in Planning Division told Business Recorder. This proposal was discussed at a meeting of Cabinet Committee on CPEC, headed by Prime Minister, Shahid Khaqan Abbasi.
Taking part in the discussion, Minister for Planning, Development & Reform, Ahsan Iqbal stated that Pakistan had become No 1 concessional recipient of Chinese loans in the world with respect to CPEC projects. Therefore, the Chinese side was interested to discuss financial mechanism as they were considering that concessional loans by China for CPEC projects would not be enough to complete the projects.
The Secretary, PD&R, Shoaib Siddique stated that in order to follow up decisions of the 7th JCC meeting held on November 21, 2017 it was essential to implement all CPEC projects. In this connection, Pakistani high officials' delegation would visit China to hold discussions to resolve all outstanding issues.
Secretary to the Prime Minister, Fawad Hasan Fawad maintained that there was no need of new power projects as there would be surplus power in the country after completion of on-going projects. Therefore, the emphasis should be laid on their completion within given timeline. He stated that he had raised the issue of transmission line time and again since existing transmission lines have no capacity to bear additional power load.
He impressed upon availability of the transmission lines for evacuation of power after Commercial Operation Date (COD) of power projects. Minister for Planning, Development & Reform apprehended that if the issue of water and power supply for Gwadar was not resolved prior to summer 2018, it would affect the pace of the whole project badly. Moreover, it would give opportunity to the opponents of the CPEC projects to exploit these issues for political gains. The Secretary to the Prime Minister stated that the project of 300 MW Coal Power Plant at Gwadar is being delayed at the pretext of environmental hazard and non-availability of land. However, the Chinese side has no issue in this regard as they have developed a technology for coal based power plants, which is free from any environmental hazards.
He stated that water mafia in Gwadar was the main hindrance in launching any water treatment scheme in the area as existing supplier is earning hefty profits on this account. He argued that though water supply is a provincial subject, however, keeping in view the ongoing CPEC projects, Federal Government should take initiative for establishment of desalination plant for supply of water in Gwadar. He suggested that Gwadar Port Authority which was a Federal Government entity may be directed in this regard. The Prime Minister agreed to the proposal of Secretary to the Prime Minister. The Secretary, PD&R endorsed the views of the Secretary to the Prime Minister and stated that Chinese side was very concerned about the non-availability of water supply in the area and asked Pakistan to arrange supply to resolve the issue at the earliest.
Secretary, Power Division, Yousuf Naseem Khokhar informed the meeting that the Government of Pakistan had issued Letter of Intent (LoI) to China Communication Construction Company (CCCC) for Establishment of 300 MW Power Project on May 26, 2017 which expired on 26 November 2017. However, owing to the delay in the tariff determination the validity of LoI has been extended for another six months up to 26 May 2018 by PPIB. He stated that the Federal Government has been coordinating with the Government of Balochistan for earliest resolution of issues relating to land acquisition/transfer. Balochistan Environmental Protection Agency conducted official hearing for Environmental and Social Impact Assessment (ESIA) of the project on January 9 & 10, 2018. NTDC would b required to share GIS data with the company to finalize grid interconnection and evacuation study. However, the company had been lethargic to submit necessary information to NEPRA for tariff determination.
Secretary, Ministry of Railways updated the meeting about ML-I project. She stated that the scope of the project would include: (i) doubling of entire track from Karachi to Peshawar, (ii) speed of passenger trains to be raise from 65/110km/h to 160 km/h, (iii) freight trains to operate at 120 km/h, (iv) computer based signalling and control system, and (v) grade separation to ensure safety of train operations.
She highlighted the benefits of the project as follows: (i) freight traffic to increase from 5 to 25 million tons/annum by 2025; (ii) passenger traffic to increase to 55 to 80 million passengers/annum; (iii) train transit time to be reduced by half, reduced congestions at ports and major cities; and (iv) contribute towards cost of doing business.
Secretary, Ministry of Railways informed the meeting that the ML-I project was declared strategic by 6th JCC meeting held in Beijing. Framework Agreement of the project was signed on May 15, 2017 during the Prime Minister's visit to China. Memorandum of Understanding (MoU) was also signed between M/o Planning, Development & Reform (Pakistan) and National Development Reform Commission (NDRC) of China. Commercial contract for preliminary design was signed on May 15, 2017. She stated that total cost of the project would be $ 8.2 billion. Therefore, the project was proposed to be implemented in phases. The financial requirement for completion of phase-I would be $ 3.9 billion. The Ministry of Railways and Ministry of Planning, Development & Reform supported central loan option in line with other CPEC infrastructure projects. Various aspects including current status of the project, financing modalities, cost and benefit analysis and strategic nature of ML-1 project were discussed in detail.
During ensuing discussion, on the query of the Prime Minister, Secretary, Ministry of Railways stated that total revenue generated by the Pakistan Railways last year was Rs 41 billion and Federal Government had provided subsidy of Rs 37 billion on account of payment of pay and pension. Prime Minister observed that every year, about Rs 100 billion would be required for repayment of loan for ML-1 project but with this volume of revenue, how will Pakistan Railways repay the huge loan to be undertaken for the proposed ML-1 project; and added that due to financial constraints, Federal Government would not be in a position to allocate enough funds in this budget for the purpose.
He further stated that it was an irony that Pakistan Railways could not even develop its infrastructure during the last seventy years to cater for future needs. He observed that Pakistan Railways was not running as a business entity rather as an administrative entity. He stated that China had made their railways a profitable organization and they had a solution for Pakistan Railways. Therefore, a business plan may be devised to increase the revenue of Pakistan Railways through exploring the option of franchising railways route.
Chairman, NHA updated the forum on the implementation status of road projects under CPEC programme. He stated that Sukkur-Multan (392 km) and Thakot-Havelian (118 km) were the two early harvest CPEC projects, which began in 2016 and would be completed by August, 2019 and March 2020 respectively. More than 35% work has been done on both projects. KKH Thakot-Raikot remaining portion (136 km), Khuzdar-Basimna Road (110 km), and upgradation of D.I. Khan-Zhoh Phase-I (210 km) were short term projects which were approved in the 6th meeting of JCC held on December 29, 2016.
Chairman, NHA further apprised the meeting that the projects proposed by the provinces for inclusion in the CPEC portfolio were: (i) Keti Bunder Sea Port Development Project, (ii) Naukundi-Mashkhel-Panjgur Road project connecting (N-40) with M-8 and N-85 (290 km), (iii) Chitral CPEC link road from Gilgit-Shandor-Chitral to Chakdara (359 km), and (iv) Mirpur-Muzaffarabad-Mansehra Road for connectivity with CPEC routes (200 km). The JWG was instructed to workout proposals, based on further studies and consultation for implementation of these projects. He stated that in spite of fulfilling formalities of short term projects, the draft Government to Government Framework Agreement has not been worked out by the Chinese side. On the contrary, in the 7th JCC, the Chinese side proposed to identify, mutually acceptable concrete steps for finalization of implementation mechanism. Mirpur-Muzaffarabad-Mansehra (MMM) road project was considered a viable project and matured for implementation.
Regarding provincial projects, it was agreed that these projects should be presented in Joint Working Group (JWG) after completion of feasibility studies. Prime Minister appreciated progress on Havelian-Thakot and Sukkur-Multan projects. He observed that work on both projects is ahead of the expected completion time. He stated that Mirpur-Muzaffarabad-Mansehra (MMM) is an important project as it would provide the shortest route from Central Punjab to CPEC route through AJK and it would also save billions of rupees on travel expense.
Secretary, Board of Investment (BoI) gave an update on the progress of industrial Cooperation under CPEC. She stated that in the 6th JCC meeting held on December 29, 2016, BoI was designated as the lead agency on Industrial Cooperation (IC) and Chairman BoI as the convener of the Working Group on IC from Pakistan's side. He stated nine sites have been selected as prioritized SEZs in the 6th Pak-China JCC meeting in pursuance of the decision of the JCC, BoI has devised an incentive package for establishment and relocation of industries from abroad. Federal Cabinet approved the package on May 12, 2017. On invitation of Pakistan side, Industrial Group Experts from China visited Pakistan from July 10-14, 2017. They also visited sites in KPK and Punjab. They proposed constitution of a similar Expert Group from Pakistan side. Pakistan side notified Expert Group in September 2017. The first meeting of Joint Experts Working Group (JEWG) was held on 17th October 2017 in Islamabad. The main decision taken was to complete feasibilities of Prioritized Special Economic Zones (pSEZs) before JCC to move forward. Site visits of pSEZs were arranged in Sindh, Punjab & Khyber Pakhtunkhwa in October, 2017. BOI arranged trainings on SEZs in Karachi, Lahore & Islamabad in October 2017. Following live (05) feasibility studies and two (02) pre-feasibility studies of pSEZs have been prepared and passed on to Chinese side during 7th JCC:
Prime Minister observed that 3-4 prioritized SEZs will suffice in the early phase and Board of Investment should come up with a proposal for which a separate meeting may be arranged and funds may be arranged through PSDP for the establishment of the prioritized SEZs by the federal government. Secretary to the Prime Minister emphasized that development of SEZs was a core component of CPEC. Without investment in SEZs, loan portfolio of CPEC will became risky. Moreover, investment in production will actually lead to growth of GDP job creation and increase in exports. Hence, more focus on SEZs is urgent.
Secretary to the Prime Minister also proposed that that due to non seriousness of the provinces, the matter regarding establishment of SEZs may be brought on the agenda of National Economic Council (NEC) meeting. He stated that factors like availability of human resources, raw materials and connectivity to the port should also be taken into account while setting up of the Special Economic Zones.
After detailed discussion, the committee decided that no new power project shall be planned for additional generation. Special emphasis shall be given to complete all ongoing energy projects within their given timelines. Availability of transmission lines shall be ensured for evacuation of power from the power projects prior to their Commercial Operation Date (COD).
It was also decided that Power Division would ensure that Multan-Lahore HUDC Line is completed expeditiously, in complete synchronization with expected COD of Thar Projects.
The other decisions committee are as follows: (i) Ministry of Maritime Affairs/ Gwadar Port Authority (GPA) to take necessary steps for arrangement of water supply in Gwadar, taking into account FWO proposal; (ii) Power Division to complete all formalities required for establishment of the 300 MW Coal Power Project in Gwadar in the shortest possible time through active engagement with Government of Balochistan over EIA Report and pending land acquisition; (iii) issue of financial mechanism for the CPEC projects shall be raised with the Chinese side at political level; and (iv) Communication Division/NHA will complete all road projects under CPEC programme within given timelines.