The China Pakistan Economic Corridor has become a millstone around Pakistan's neck (Photo: Xinhua/IANS)
Chinese companies working on power projects, initiated under China Pakistan Economic Corridor (CPEC), are still facing financial woes despite Prime Minister’s repeated assurances, Pakistan-based Business Recorder reported.
Chinese companies have raised the issue at all forums through Pakistan’s embassy in Beijing and its own embassy in Islamabad. Chinese insurance company, M/s Sinosure, is also unwilling to insure new financing for power sector projects due to failure to meet the contractual obligations of companies that have already established projects, the report stated. According to official documents available with Business Recorder, Sindh Engro Coal Mining Company (SECMC) has informed Power Division that due to significant delays in the opening of Letters of Credit (L/Cs) and foreign remittance, its mining operations are severely impacted.
SECMC is also incurring demurrage charges, liquidated damages and penalties due to delays in approvals, which are also resulting in damage to reputation, as well as, additional cost. SECMC is continuously engaged with banks but a significant amount is still pending, according to Business Recorder.
“Our O&M contractor has now communicated that due to significant delay in their payment they are unable to continue mine operations. We request your immediate intervention to support remittance of payment to our Chinese O&M contractor; otherwise, mine operations will stop with immediate effect,” Amir Iqbal, CEO SECMC in his letter to Secretary Power was quoted by Business Recorder as saying.
Shutting down the operations of the mine will lead to the shutdown of the four power plants operating on Thar coal namely, Engro Power Thar Limited (EPTL 660 MW), Thar Energy Limited (300 MW), Thal Nova Power Thar(Pvt.) Limited (330 MW) and Lucky Electric Power Co(660 MW). Equivalent power capacities operated on imported coal will result in additional forex burden of US 85 million per month on the economy and will also result in three times more expensive power generation, he added.
Port Qasim Electric Power (Pvt.) Co (PQEPC) has informed the government that both its units of 1320 MW are about to shut down as a direct result of the default of GoP’s obligations.
Indo Pacific Centre for Strategic Communications (IPSCS) recently reported that the experience of Chinese companies working on the ground in Pakistan has been far from pleasant. Most of the early China-Pakistan Economic Corridor investments were in the power sector. The investments, however, created sizeable liabilities on the future cash flows of these projects.
According to the IPSCS report, most of the deals signed by Chinese companies with Pakistan entailed assurance of exorbitant rate of returns to the Chinese companies for their investments. Going through an economic crisis for most of the past five years, Pakistan never seemed comfortable in fulfilling these liabilities by making timely payments.
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