Power production contracts with Chinese firms need review: Pakistan Minister

Islamabad [Pakistan], August 25 (ANI): Pakistani Minister for Power Awais Leghari has said that contracts with Chinese firms engaged in power production in Pakistan need to be revised, US-based VOA reported on Sunday.

“I think the terms and conditions that we already have with the Chinese as far as their IPPs [independent power producers] are concerned, they need another look,” VOA reported, quoting Leghari.

The debt ridden country failed to increase their industrial growth, which left them with huge bills of the power they wasted. In addition to this, Pakistan is still repaying the project loans, VOA reported.

As per the VOA report, Pakistan’s local independent power plants also have the same conditions in their contracts as their Chinese counterparts operating in the country.

The power minister said that they are holding talks with Chinese officials of these power plants to redefine the debts in the power sector. They are also seeking to convert coal-fired power plants into locally-produced fuel. He also talked about Pakistan’s efforts to bring down electricity prices for consumers, VOA reported.

“Those are changes in the terms and conditions of how the Chinese IPPs [Independent Power Producers] are working with us. Those would give us very substantial benefits to harvest in terms of [electricity] tariff reductions,” VOA reported, quoting the power minister.

VOA News said that Pakistan owed over USD 15 billion to China-owned power plant operators.

The cash strapped nation sought to reschedule payments to Chinese power plant owners to secure an IMF bailout. It reached a staff-level agreement with the IMF for a three-year USD 7 billion loan programme last month, VOA reported.

Leghari said that China and the IMF- both want to see reforms in Pakistan.

China and the IMF “are wanting to look at the entire economic or power sector reform that we have already authored and embarked upon,” Leghari said. “I think the more confidence they have in our economic reform agenda, the better the response,” he told VOA.

VOA stated, quoting Pakistan’s daily Express Tribune, that as Pakistan aims to save millions of dollars by this move, the Chinese power plant owners agreed to use local coal in three of its power plants instead of importing it.

However, this move worries experts, as they fear it might prompt wearied Chinese investors to seek higher margin in profits and higher insurance premiums, which will thus result in lesser savings in Pakistan, VOA stated.

Lehari, however, rebuffed these fears. “It’s going to be a win-win situation for everyone… Unless that isn’t there, people will not invest, and lenders will not give money.”

However, Pakistan lacks infrastructure to transport coal to long distances. The local coal is also of inferior quality than imported coal as it is dirty; hence, Pakistan would need to make structural changes to its existing infrastructure, VOA noted.

But Leghari dismissed these concerns too and said, “There has been an overwhelming response to have a look and run technical and financial feasibility on all the aspects of coal conversion and reprofiling.”

He also said that Chinese investors will not be scared by Pakistan’s decision to review old contracts, as Pakistan holds its investors “dear to our hearts.”

“Whatever will happen, with whomever, will be with mutual consent,” Leghari said.