Five more CPEC power projects to get special treatment

 

ISLAMABAD: 

The government on Tuesday approved the second supplemental treaty to the China-Pakistan Economic Corridor (CPEC) framework agreement aimed at extending preferential treatment in making power purchase payments to another five projects having a capacity to generate 1,300 megawatts electricity.

Quaid-Azam Solar Power Plant (1,000 MW, Punjab), 50MW wind power plant of Hyrdo China Dawood Power Limited being set up in Thatta, Sindh; 50MW Sachal Energy Development Limited wind project, Jhimpir, Thatta; 100MW Three Gorges Wind power project and 99MW UEP Wind Power Private Limited would be entitled for special treatment.

Headed by Prime Minister Shahid Khaqan Abbasi, the Economic Coordination Committee (ECC) of the cabinet approved the second Supplemental Agreement to Implementation Agreement of the CPEC projects.

Five CPEC projects face the axe

The ECC also allowed export of 1.5 million metric tons of sugar at subsidised rates. The federal and provincial governments will pay Rs10.70 per kilogram subsidy on export of sugar.

“The freight subsidy will not be available to sugar mills that do not start the crushing season by this Thursday,” said the commerce ministry, adding, “The subsidy will also be withdrawn from the millers who fail to make timely payments to growers.”

The ECC also imposed Rs4,669 per ton regulatory duty on the import of liquefied petroleum gas aimed at giving benefits to local producers.

“The ECC accorded its approval to making necessary amendments to the ECC approved Supplemental Agreement to Implementation Agreement (SAIA) for the CPEC projects,” according to an official handout of the Prime Minister’s Office.

Govt approves 16 more projects worth Rs212b

In February last year, the ECC had approved the supplemental agreement aimed at binding the power purchaser to make timely payments to Chinese and their local partners of the electricity they would produce as part of the CPEC megaproject.

“In case, the power purchaser fails, the Ministry of Finance will make these payments.”

Under Article 2 of the 2016 Supplemental Agreement, a revolving account is being set up to cover 22% of monthly electricity invoices issued by power producers.

The 22% is the difference between the billed amount at the time of generation and actual recovery from consumers.

The projects being set up under the CPEC umbrella are immune from adverse effects of the circular debt. The second supplemental agreement will now protect the Chinese and their local partners of five projects from the adverse impact of the chronic circular debt.

The Power Division informed the ECC that three wind power projects achieved their financial close prior to the approval of the first Supplemental Agreement in February 2016.

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They included M/s UEP Wind Power Project, M/s Three Gorges Second Wind Farm Pakistan, and M/s Three Gorges Third Wind Farm Pakistan and have now requested to sign Supplemental Agreement with the Alternate Energy Development Board.

It said since all of those projects have already achieved financial close and some have achieved commercial operation date, certain amendments would be required in order to execute the agreements with them.

The Power Division circulated the summary just a day before the ECC meeting, giving no time to other stakeholders to comment on that.

The ECC decision heightens the issue of discriminatory treatment being meted out to the independent power producers (IPPs), which are generating roughly 6,000MW of electricity under the 2002 power generation policy but are not being paid on time.

Interestingly, some of the partners in energy projects being set up under CPEC also operate plants under the 2002 policy. The supplemental agreements’ local beneficiaries include Arif Habib Group, Nishat Group and Engro Group among others.

China had refused to set up power plants until the government agreed to an arrangement where Chinese investors or projects funded by Chinese financial institutions were protected against the circular debt.

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There is a unique clause in the Supplemental Agreement that says that in case of any conflict between the terms of the Supplemental Agreement and the Implementation Agreement, the Supplemental Agreement shall prevail.

In order to discourage fuel adulteration and tax evasion, the ECC allowed addition of Fuel Marker in Superior Kerosene Oil (SKO).

The ECC also approved determination and notification of UCH-II Gas Price, as agreed under Gas Pricing Agreement (GPA) by Oil & Gas Regulatory Authority under the OGRA Ordinance, 2002.

The ECC also allowed disposal of 500,000 tons of surplus wheat of PASSCO through local sale.

Source: The Express Tribune, 29th November 2017.

Chinese manufacturing activity surges in November

BEIJING: Chinese manufacturing activity accelerated in November, a survey showed Thursday, adding to signs of a pickup in global and domestic demand.

The China Federation of Logistics and Purchasing said its purchasing managers’ index rose to 52.4 from October’s 51.6 on a 100-point scale on which numbers above 50 show activity accelerating.

Components of the survey that measure imports, exports and new orders all improved, while employment indicators fell to the lowest level in a year.

“The breakdown shows a broad-based pickup in demand,” said Julian Evans-Pritchard of Capital Economics. However, he cautioned that the measure has given “false signals” about the economic trends in the past.

Chinese economic growth has been unexpectedly strong this year, but forecasters expect activity to weaken as Beijing tightens controls on bank lending to cool a rise in debt cited by analysts as the biggest threat to China’s economic stability.

The growth rate edged down to a still-robust 6.8 percent over a year earlier in the latest quarter from the previous quarter’s 6.9 percent.

That was buoyed by strength in retail spending and exports.

Since then, regulators have tightened controls over asset management companies and rein in the growth of a micro-lending industry. That triggered a fall in Chinese stocks.

Source: Pakistan Today, 30th November 2017.

CPEC will aggravate India-Pak tension: US think-tank

WASHINGTON: The multi-billion dollar China- Pakistan Economic Corridor (CPEC) will deepen China’s already formidable presence in the South Asian nation, and “aggravate” tension between India and Pakistan, a US think-tank said today.

“CPEC will deepen China’s already formidable presence in the country and clearly aggravate India-Pakistan tensions. In addition, real questions persist about Pakistan’s ability to finance its share of new energy investment,” Michael Kugelman, deputy director and senior associate for South Asia Program at the Wilson Center said in a report published today.

According to him, even though the CPEC may enable Pakistan to generate more power, it will not solve the country’s broader energy crisis, which is rooted in factors that go well beyond supply shortages.

“Stability in Pakistan’s security situation and economic performance is increasingly in critical interest for Beijing because it is a precondition for CPEC’s success. Given New Delhi’s strenuous opposition, CPEC will exacerbate India- Pakistan tensions,” Kugelman wrote.

Among other things, CPEC cements the already deep presence of Washington’s top strategic competitor in a region where the US has a much lighter footprint, he said.

“The project also generates additional obstacles for the Indian efforts to access markets and natural gas reserves in Central Asia — a region that India cannot reach directly by land because Pakistan denies its transit rights on Pakistani soil,” he said.

According to Kugelman, Beijing’s message is very similar to Islamabad’s — it uses only the most positive of rhetoric and with a triumphant and confident tone. Like Pakistan, China has much at stake, he said.

As per the report, CPEC is in some ways a test case of the Belt and Road Initiative (BRI) because it includes some of the initiative’s first projects to become fully operational.

“Privately, however, China worries about the security risks to CPEC, even as terrorist violence has subsided in Pakistan since 2014, when the Pakistani military launched a major counterterrorism offensive,” the report said, adding that many of the attacks that have taken place since then have occurred along or on envisioned CPEC routes in Baluchistan.

Separatist rebels have targeted energy infrastructure in the province for a number of years and remain an active threat.

“Furthermore, criminal gangs pose threats to CPEC projects in Punjab Province. One such outfit, known as the Chotu Gang, abducted 12 Chinese engineers working on a highway project in Punjab back in 2005,” he wrote.

Kugelman said in private conversations, Pakistani officials and analysts offer a sobering appraisal of the project. “Privately, Pakistanis also express concern about the country’s ability to pay back loans in the coming years, as well as about the security threats ranging from terrorism and separatist insurgency to organized crime that threatens CPEC construction,” he said.

Referring to India’s reaction to CPEC, Kugelman said New Delhi’s biggest objection to CPEC is that it entails building projects in Gilgit-Baltistan. “New Delhi does not formally oppose BRI as a whole; rather, its stated concerns are restricted to CPEC, which it has described as a violation of Indian sovereignty, he noted.

SOURCE: THE TIMES OF INDIA