ECNEC Gives Green Light to $11.3 Billion in CPEC Initiatives
Just hours before Prime Minister Shehbaz Sharif's scheduled visit to Beijing, a series of consecutive meetings across various forums ushered in nearly $12 billion worth of three major projects. These projects secured their spot within the expansive China-Pakistan Economic Corridor (CPEC), concurrently addressing a long-standing request from Chinese investors for the establishment of escrow accounts, ensuring the seamless settlement of their electricity supply dues.
Just hours before Prime Minister Shehbaz Sharif's scheduled visit to Beijing, a series of consecutive meetings across various forums ushered in nearly $12 billion worth of three major projects. These projects secured their spot within the expansive China-Pakistan Economic Corridor (CPEC), concurrently addressing a long-standing request from Chinese investors for the establishment of escrow accounts, ensuring the seamless settlement of their electricity supply dues.
In a swift and decisive move, the Economic Coordination Committee (ECC) of the cabinet, as well as the Executive Committee of the National Economic Council (Ecnec), convened impromptu sessions to deliberate upon summaries presented on the same day, under the guidance of Finance Minister Ishaq Dar.
Of particular interest was the synchronization of the three project proposals introduced for integration into the CPEC framework. Notably, they considered an exchange rate of Rs200 per dollar for the $9.85 billion railway venture connecting Karachi to Peshawar, Rs230 per dollar for the Karachi Circular Railway (KCR), and Rs176 per dollar for a modest hydropower initiative in Azad Kashmir.
Ecnec extended its preliminary approval to the Ministry of Railways' modified plan for the Main Line-1 (ML-1) upgrade, a project now valued at $9.85 billion (Rs1.97 trillion). This marked a substantial 45 percent increase from the previously sanctioned amount of $6.5 billion in August 2020. The proposal, expected to be officially presented during Prime Minister Sharif's visit, involves a significant Chinese investment of $8.4 billion.
However, the green light for this project comes with prerequisites, including a thorough assessment of costs, technical specifics, and a preference for an equity participation financial model, subject to third-party validation by an independent consultant in consultation with Chinese counterparts.
Furthermore, Ecnec granted approval for the KCR project, with a total cost of Rs292.388 billion (approximately $1.27 billion), and a foreign contribution of Rs263.149 billion. Additionally, it greenlit the establishment of a 48MW hydropower venture in Neelum district, Azad Kashmir, contingent upon cost adjustments based on the exchange rate of the dollar at Rs220.
Separately, the ECC expedited the activation of a Rs50 billion escrow account, named the Pakistan Energy Revolving Fund (PERF). This account will facilitate automatic payment of dues to Chinese power suppliers, given that Sinosure, the insurer, had ceased coverage for investments in Pakistan due to a substantial backlog of unpaid dues in existing investments. The power sector's liabilities to Chinese investors had exceeded Rs300 billion.
The Ministry of Energy, specifically the power division, introduced a summary regarding PERF, which the ECC approved. This involved establishing an assignment account titled PERF, to be opened with the State Bank of Pakistan (SBP) in Islamabad and operated by the Central Power Purchasing Agency (CPPA).
Additionally, the ECC made special allowances for changes to the commissioning period of Shanghai Electric's 1320MW Thar Coal Block-1 Power Generation Company (TBC). These modifications pertained to the power purchase agreement (PPA) for the commissioning of the designated project, CPEC's TCB-I (focused on Thar Coal), without the requirement of financial close.