Home »Top Stories » China lending explained

Pakistan has obtained a total of $ 6 billion concessional loans from China at an interest rate of 2.29 percent with a seven-year grace period and a 25-year repayment period for infrastructure projects under the China-Pakistan Economic Corridor (CPEC).

The Ministry of Planning, Development and Reform Monday told this to the Senate Standing Committee on Planning, Development and Reform while briefing on the CPEC projects. The committee discussed the latest situation and implementation status of CPEC projects.

While briefing the committee, project director/CPEC coordinator/focal person CPEC, Hassan Daud Butt said that Pakistan has acquired a $6 billion loan for infrastructure projects and the grace period of 90 percent projects is ongoing. He said there is total of $ 36 billion investment made by China''s companies on 22 development projects including 15 energy projects. He said that work is under way on 15 energy projects of 11,110 MW and four projects of 2544 MW are actively promoted.

However, the CPEC project director told the committee that Pakistan has not received $8.13 billion loans for railways project ML-1 so far.

He said that total portfolio of CPEC projects is $47.967 billion including $34.18 billion of energy projects (IPP financing mode), $4.18 billion concessional loan for transport and infrastructure projects, $8.212 billion loan for rail network - ML-1 (GCL under discussion, $780.6 million for Gwadar Port (grant/GCL/interest free loan) and $48 million (GCl/grant) for other projects including Gwadar City Master Plan.

According to documents about energy projects, Port Qasim Electric Power plants (2x660 MW, $1,912 million-IPP) Karachi have been completed; SSRL Power-Thar Coal Block-1 2x660 MW (2000 million-IPP) and SSRL Coal Mine Thar Block-1, 6.8 metric tons per annum, are expected to be completed in 2019; Sachal Wind Power of 50MW in Sindh was completed in 2017; Hydro China Dawood Power Wind Power Project (50MW, $112.65 million-IPP) was completed in 2017; Jhimpir Wind Based Power (1x100 MW, $ 224 million -IPP) will be completed in 2018 and Matiari-Lahore Transmission Line ($1,500 million-IPP, Sindh-Punjab) is expected to be completed in 2019.

The documents further revealed that work on Oracle Thar Coal Based Power Plant Mine 2x660 MW ($1300 million -IPP) is under way while Engro Surface Mine in Block-11 of Yhar Coal, 3.8 metric tons per annum, (1470 million -IPP) and Engro Thar Coal-fired Power Plant 4x330 MW (2x330 approved and 2x330 pending approval, $ 1990 million -IPP) projects are expected to operate at the end of this year. Work continued on 870 MW Suki Kinari Hydropower Project in Khyber Pakhtunkhwa at $1956 million with IPP mode and Commercial Operation Date (COD) of Hubco-Coal based Coastal(1x660 MW) in IPP mode in Balochistan is expected in 2018/19.

Project Director CPEC Hassan Daud told the committee that 4,000MW of power have been added to the national grid under the CPEC. He said that a total of 17,000MW electricity would be generated under the CPEC energy projects.

He said that a meeting of Joint Working Group of China and Pakistan would be held in Beijing on October 16, 2018 to discuss the CPEC projects.

The member finance of Planning Commission told the committee that non-provision of funds by the federal government from PSDP and delay by China in the approval of project is affecting work on the Western Route of CPEC. The government is not providing Rs 25 billion allocated in the PSDP to pay off for the CPEC projects, he said while briefing the committee.

The committee was informed that due to funds problem, work on the Western Route of CPEC from Hakla to DI Khan could not be started. Similarly, delay on the part of China in the approval of project construction work on the Western Route from Zhob to DI Khan is affecting the pace of work.

The member finance of Planning Commission told the committee that the price of electricity per unit would be decreased in coming days due to a competitive bidding process.

He said that the price of electricity is Rs 8.5 per unit at imported coal and Rs 8 per unit at local coal and Rs 9.5 at LNG fuel. He said the price of electricity has been fixed at the rate of Rs 5 per unit on solar after biding process.

About the security of the CPEC projects, the official of Planning Commission told the committee that a total of 9,929 troops and 4,502 civilians are available for the security of the CPEC projects. He said a total of 10,000 Chinese and 65,000 Pakistanis are working on various CPEC projects. He said a total of eight investors, four each from Pakistan and China, have signed a memorandum of understanding (MoU) in Gwadar Free Zone.

The committee chairman said the local people should be appointed for the security of the CPEC projects.

The members of the committee particularly those belonging to Balochistan expressed their serious concerns over the shortage of water and electricity in Gwadar city and slow pace of work on the Western Route under the CPEC.

They said that 300,000 gallons of water is being supplied to Gwadar city per day against 6 million gallons demand.

At the end, the committee recommended the government to resolve issues of water, electricity and security in Gwadar port city.

Copyright Business Recorder, 2018

the author