Pakistan seeks relief from China over Belt and Road Islamabad wants to renegotiate repayment after claiming costs of power plants were inflated
A Pakistan report alleges that set-up costs for two power plants were inflated by millions of dollars © Asad Zaidi/Bloomberg Share on Twitter (opens new window) Share on Facebook (opens new window) Share on LinkedIn (opens new window) Save Stephanie Findlay in New Delhi, Farhan Bokhari in Islamabad and Sun Yu in Beijing
JUNE 26 2020 89
Pakistan is trying to renegotiate Belt and Road repayments after it alleged that Chinese companies had inflated power project costs by billions of dollars. The renegotiation talks began after Islamabad released a report by a committee convened by the prime minister that accused Chinese and local power companies of “malpractices” and exaggerating costs. The financial stress caused by the coronavirus pandemic has lent the negotiations greater urgency.
The report said coal plants Huaneng Shandong Ruyi (Pakistan) Energy and Port Qasim Electric Power Company were overcharging by about $3bn over the 30-year project lifetime through inflated set-up costs and interest payments. Set-up costs alone for the two plants were inflated by more than Rs32bn ($204m) over “misrepresentation” of interest payments. Time and time again Pakistan has managed to lock itself into these deals that hollow out the economy Kamal Munir, Cambridge university Under pressure from Beijing, Islamabad has deferred a probe into the alleged corruption while it tries to win more favourable terms through back channel negotiations.
According to people familiar with the talks, the Pakistan government is not asking to renegotiate power tariffs for now, but instead wants to delay repayments for up to 10 years. “Given the economic circumstances we are trying to seek relief wherever possible. That’s why we want to first deal with all independent power producers informally and see how far we progress, before we formalise this process,” a Pakistani cabinet minister, who wished to remain anonymous, told the Financial Times. Imran Khan inherited a balance of payments crisis when he came into power in 2018. After months of delay, Islamabad finally asked the IMF for a three-year $6bn bailout. The programme has been paused as the country tries to revive its economy and eases lockdown restrictions even as coronavirus infections soar.
A director at Heng cheng xin Group, a Beijing-based engineering consultancy that helped set the price for the Huaneng coal power plant, said the cost was “a reasonable figure”. “It is possible that the project may carry a new price tag if we re-evaluate it with the latest condition. But that doesn’t mean our previous estimate was wrong,” said the director, who asked to remain anonymous over fear of reprisal. “Pakistan needs to provide concrete evidence to prove the project is overcharged.”