CPEC Projects Continue to be Thwarted by Issues, Yet to Be Resolved

October 21, 2021

The government has missed yet another of its self-imposed deadlines for resolving issues impeding progress on the first-phase projects of the China-Pakistan Economic Corridor (CPEC), potentially increasing mistrust among Chinese investors.

The third meeting of the Pakistan-China Relations Steering Committee examined the status of CPEC projects and discovered that the majority of its directives issued in the first week of August had gone unimplemented.Asad Umar, Federal Minister for Planning, Development, and Special Initiatives, presided over the meeting.

According to those who attended the meeting, the steering committee’s orders were not carried out by the Ministry of Energy. The government set the end of August as the deadline for the Power Division to develop a policy to deal with the delay in starting commercial operations of five CPEC power projects totaling 3,600 megawatts. To resolve the issue, the Ministry of Energy was directed to submit the policy to the Cabinet Committee on Energy.

“The Power Division informed the committee that proposals for the extension of the commercial operation date (COD) of six power projects were under consideration, and the matter will be discussed at the upcoming CPPA board meeting,” said a statement issued by the Ministry of Planning following the meeting.Due to the overall slowdown of work on CPEC projects, Covid-related delays, and strikes at some projects, the projects are falling far behind their agreed-upon commissioning dates with the government of Pakistan and Chinese investors.

In the event of a power producer’s delay, the project sponsors are usually threatened with penalties. However, the delay is due in part to policy decisions made by the government. These power projects have been delayed: the 884MW Suki Kinari Hydropower Project, the 720MW Karot Hydropower Project, the 330MW Tel project at Thar block-II, the 330MW ThalNova Thar block-II, and the 1,320MW Thar block-I. The Suki Kinari project will be delayed for at least 10 months; the Karot project will be delayed for four months; the Tel Thar project will be delayed for one year; the ThalNova project will be delayed for 15 months; and the Thar block-I project will be delayed for at least one year.

Chinese investors have long complained about Pakistan’s inability to resolve issues. The 10th meeting of the CPEC Joint Cooperation Committee (JCC) raised hopes that Pakistani authorities would soon begin addressing those issues; however, the committee proceedings indicated that things were still moving at an unusually slow pace, much to the chagrin of Chinese investors. A dispute over imported coal handling charges has remained unresolved between Sahiwal Power Plant and the Port Qasim Authority.

The meeting was informed that the issue of either amending the implementation agreement or allowing other importers to use the idle berth space is still pending. The plant is also experiencing difficulties as a result of the government’s failure to make timely power purchase payments.

The difficulties in obtaining visas for Chinese citizens remained unresolved, and a representative of the Ministry of Interior initially claimed that the ministry had not received any correspondence in this regard.

However, the issue of the 660 KV HVDC Matiari Lahore Transmission Line’s Right of Way (RoW) near Karachi has been resolved, and power is now being evacuated through the transmission line, according to the Ministry of Planning.

The committee was also briefed on the Suki Kinari Hydropower Project, which has an installed capacity of 880 MW. The Khyber-Pakhtunkhwa (K-P) government raised the sales tax on construction services from 1% to 2%, which Chinese investors claimed was not in line with other similar projects. According to the sources, this matter is still pending. Asad Umar directed the KP government to address the project’s operational issues as a matter of priority.

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