Chinese investors in CPEC power projects seek revolving fund

ISLAMABAD: Chinese companies which have invested in power sector under the China Pakistan Economic Corridor (CPEC) umbrella have stepped up pressure on the government to set up revolving fund to ensure timely payments and keeping them away from adverse impacts of circular debt causing delayed payments.

Circular debt has now swelled to Rs1,044 billion (Rs547 billion payables and Rs497 billion loans of power sector) and in the presence of huge circular debt, the liquidity crisis has hit back the power sector, exposing all electricity generation plants, including power projects installed under CPEC, to delayed payments.

“Yes, there is an incessant pressure by the Chinese companies on the government to keep them away from delayed payments on account of circular debt as the government had extended assurance to China that Chinese investors in power sector under CPEC will not be exposed to delayed payment. The government had also assured to set up the revolving fund to ensure timely payments, one of the top men of the Power Division told The News. The Power Division has circulated the summary to all stakeholders in the government prior to tabling it in the Economic Coordination Committee (ECC) for approval which suggests setting up revolving fund of Rs49.4 billion which is 22 percent of the monthly payments and capacity charges of the four projects that include coal-based Port Qasim Power Plant, coal-based Sahiwal Power Plant, Engro Thar and UEP wind power plant. The Power Division has suggested to the Finance Ministry to provide sovereign guarantee against the amount of Rs49.4 billion which the Central Power Purchasing Agency (CPPA) will arrange from commercial banks to set up revolving fund. The CPPA will maintain the revolving fund. The other proposal that the Power Division has pitched before Finance Ministry is that that the Power Holding Private Ltd can also be entrusted the task to arrange the loan of Rs49.4 billion under the sovereign guarantee for setting up revolving fund. According Joint Secretary (Power) Zargham Eshaq Khan, major amount of Rs89 billion is also part of circular debt only because of the delay of one-and-a-half years in notifying the tariff of electricity.