The Chinese government has reportedly urged Islamabad to review IPPs committee report prepared during Imran Khan’s tenure as they have come under much criticism, well-informed sources told Business Recorder. Beijing’s concerns were recently conveyed by the Chinese ambassador to Pakistan, Nong Rong at a recent meeting with Prime Minister Shehbaz Sharif.
According to IPPs report prepared by Muhammad Ali Committee, also comprising representatives of a key intelligence agency, excess setup cost of Rs. 32.46 billion was allowed to the two coal-based plants due to misrepresentation by sponsors regarding Interest During Construction (IDC) as well as non-consideration of earlier completion of plants by Nepra. These plants were completed within 27-29 months, however, IDC was allowed for 48 months.
As a result, one of the plants – Huaneng Shandong Ruyi (Pak) Energy (HSR), commonly known as Sahiwal Coal Power Plant, was entitled to an excess RoE of $ 27.30 million in annual payment of return, which is indexed to the USD and will be made every year over the entire project life of 30 years. Assuming a 6% annual rupee depreciation the excess payment over the project life works out to Rs. 291.04 billon.
The committee held that higher returns were received by the Chinese IPPs, which irritated the Chinese government. The government had requested the Chinese government to revise CPEC IPPs pact like other IPPs but Beijing refused, saying that if it allows it in Pakistan, it will also have to allow it in other countries. Pakistani authorities also sent some other proposals including sale of electricity to Afghanistan which was also not agreed to by the Chinese government.
The inquiry report was leaked to media by some quarters of former government and the then prime minister announced to make it public. However, later on, the Cabinet Committee on Energy (CCoE) decided not to make it public. The then Minister for Power, Omar Ayub Khan and SAPM Tabish Gauhar declined to share report about CPEC IPPs and American wind projects.
The sources said, Chinese ambassador to Pakistan, in his meeting with Prime Minister Shehbaz Sharif urged a review of the 2019 report that criticized Chinese IPPs under CPEC. He also reiterated Chinese proposal to establish coal-fired power plant in Gwadar as this would be far more viable and reliable option.