Pakistan to shelve major CPEC power project

Islamabad: The Pakistan government will shelve a major coal-based power plant project under the USD 60 billion China-Pakistan Economic Corridor (CPEC), which connects Gwadar Port in Balochistan with China’s Xinjiang province. It is considered a core project of Chinese President Xi Jinping’s Belt and Road Initiative (BRI).

The project has been shelved citing sufficient generation capacity already lined up for the next few years. The previous Pakistan Muslim League-Nawaz (PML-N) government had pushed for the construction of the 1,320 MW Rahim Yar Khan power project by China.

According to reports, the Prime Minister Imran Khan’s government (Pakistan Tehreek-i-Insaf) officially conveyed to Beijing that it was no more interested in the project and requested the Chinese to formally delete the project from the CPEC list.

An official said, a Pakistani delegation led by Minister Makhdoom Khusro Bakhtyar proposed to remove the Rahim Yar Khan imported fuel power plant from the CPEC list in order to provide structure optimisation space for the subsequent power market of Pakistan.

The Chinese side suggested that a joint study on optimisation of energy mix be carried out at the earliest. Cash-strapped Pakistan is negotiating a USD 8 billion bailout package from the the International Monetary Fund (IMF) to overcome a severe balance-of-payments crisis that threatens to cripple the country’s economy.

The project was originally pushed as imported coal-based plant by Quaid-i-Azam Thermal Company of the Punjab government led by PML-N president Shahbaz Sharif who used to attend meetings of the Cabinet Committee on Energy led by his brother and then prime minister Nawaz Sharif.

A leading business tycoon had proposed the project and was expected to be one of the key sponsors. The project was removed from the CPEC priority list when then bureaucracy highlighted that surplus generation capacity had already been contracted and more contracts would lead the country to ‘capacity trap’.

The government had already notified a ban on capacity addition on imported fuel as early as June 2016 and the Rahim Yar Khan and Muzaffargarh coal-based plants were removed from the CPEC priority list, the report said. Among other reasons, this led to unceremonious removal of the then power secretary and head of the National Transmission Company – the system operator.

The Punjab government had pushed for revival of the plant which was included again in the priority list in subsequent CPEC negotiations, according to a federal secretary. It was not needed at all and would have been a burden on the already deteriorating financial condition of the power sector, he said, adding that Diamer-Bhasha dam was also included in the CPEC list when the coal-based projects were removed, but the dam project could also not move forward under the CPEC for unrelated reasons.

The official said the PTI government had already made up its mind to remove almost 400 “politically motivated” projects from the development portfolio as part of a comprehensive mid-year review of the Public Sector Development Programme later this month.