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In an effort to explore the causes for the steep cost of electricity in Pakistan, the Imran Khan government has unearthed a scam of over $630 million involving power projects under the China-Pakistan Economic Corridor (CPEC). This has led to the bloating of Pakistan’s debt to $11 billion.

Pakistani media has reported that an inquiry committee constituted by Prime Minister Khan to examine the losses in the power sector has discovered corruption worth 100 billion Pakistani rupees by Chinese private power producers. The committee has recommended that the government force the producers to pay the amount for alleged malpractices.

The 278-page report, compiled by the “Committee for Power Sector Audit, Circular Debt Reservation, and Future RoadMap”, records malpractices that amount to 100 billion Pakistani rupees ($625 million) in the independent power generating sector; at least one-third of this can be traced to Chinese projects. The documents related to more than 60 power plants were examined by the committee for a period of over eight months.

The report attributes the losses incurred by the government to the “violation of the Standard Operating Procedures (SOPs) that include the cost of the installation of Independent Power Producers (IPPs), government agreements, alleged embezzlement in fuel consumption, power tariff, guaranteed profit in dollars, and certain conditions of power purchase”.

The committee has said that the government is bound to pay 900 billion Pakistani rupees to power plants under the head capacity payments, while it will have to pay a capacity payment of 1500 billion Pakistani rupees by 2025 according to the agreement.

The report alleges that government-to-government deals signed under CPEC had unduly favoured Chinese investors. For instance, one of the six power projects was found to be 234 percent more expensive than a similar project in India, the study revealed. None of these projects were offered for bidding as it is being funded by a single country, according to the inquiry report. It also states that “excess set-up costs of Rs. 32.46 billion (approximately $204 million) was allowed to the two coal-based [Chinese] plants due to misrepresentation by sponsors regarding [deductions for] the ‘Interest During Construction’ (IDC) as well as non-consideration of earlier completion of plants”. The two projects examined by the Pakistani experts’ Committee were worth $3.8 billion at the time of their launch. The Committee found over­payments of Rs. 483.64 billion, which amounts to $3 billion at current rates of exchange.

This report potentially serves as an inflection point in Sino-Pakistani relations. Until now, their bilateral ties have been driven by China’s desire to counter an emerging India in the region and to extend its sphere of influence through its Belt and Road Initiative (BRI). Simultaneously, Pakistan’s motives stem from a desire for a United Nations Security Council (UNSC) member to push forth its Kashmir agenda and to potentially broker a deterrent against Indian retaliation or aggression. In addition to infrastructural projects, the two nations conduct annual joint naval exercises, often curiously close to India’s west coast. Given that the Chinese companies inflating their costs operate with the government’s blessing and guidance, Pakistan may begin to question whether its relations with China are one of dependence or of mutual benefit. 

At the same time, however, if the experiences of Sri Lanka and the Maldives are anything to go by, Pakistani leaders themselves may be complicit in this corruption and these overpayments, so as to line their own pockets.  

Image Source: TimesNow

The Khan government has refrained from making the probe report public and this can cause a major embarrassment for both Beijing and Islamabad dubbed all-weather allies. The power sector along with Gwadar Port and highways are key pillars of the CPEC.

The report was submitted by a nine-member committee last month and the role of Chinese companies as financers and executors of the projects were scrutinised. The six power projects include both coal-fired and wind energy projects.

Read more at:
https://economictimes.indiatimes.com/news/international/business/pakistans-internal-report-indicts-china-for-corruption-in-cpec-power-sector/articleshow/75823762.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst


For now, Khan's government has refrained from making the probe report public and this can cause a major embarrassment for both Beijing and Islamabad dubbed all-weather allies. The power sector along with Gwadar Port and highways are key pillars of the CPEC. Pakistan’s planning minister Asad Umar wants to make the explosive power sector inquiry report public. But he is being opposed by the power ministry on the grounds that this will spoil ties with China.
Pakistan’s planning minister Asad Umar wants to make the explosive power sector inquiry report public. But he is being opposed by the power ministry on the grounds that this will spoil ties with China.

Read more at:
https://economictimes.indiatimes.com/news/international/business/pakistans-internal-report-indicts-china-for-corruption-in-cpec-power-sector/articleshow/75823762.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst

Pakistan's economy which is already reeling has been struggling as COVID-19 is set to create more problems for the country which has been continuously requesting for financial assistance from international organisations. This report will only strengthen the hands of people and experts in Pakistan who have grown increasingly skeptical of Chinese investments, especially through CPEC as the allegations that Pakistan is becoming a vassal state of China finds more takers. While it is hard to see real resistance to Chinese investment in the country due to their crucial strategic ties and the well-established networks between the ruling elites of the two countries, CPEC - considered to be one of the centerpieces of Beijing's flagship BRI project - will see more scrutiny in the coming days, both in the power corridors of Pakistan and in the court of public opionon.
alleged that government-to-government deals signed under CPEC had unduly favoured Chinese investors. One of the six power projects was found to be 234 per cent expensive than a similar project in India, the study revealed. None of these projects were offered under bidding as it is being funded by a single country, according to inquiry report.

The inquiry report revealed that the $1.7 billion power transmission line project of the China-Pakistan Economic Corridor (CPEC) was 234% expensiv ..

alleged that government-to-government deals signed under CPEC had unduly favoured Chinese investors. One of the six power projects was found to be 234 per cent expensive than a similar project in India, the study revealed. None of these projects were offered under bidding as it is being funded by a single country, according to inquiry report.

The inquiry report revealed that the $1.7 billion power transmission line project of the China-Pakistan Economic Corridor (CPEC) was 234% expensiv ..

alleged that government-to-government deals signed under CPEC had unduly favoured Chinese investors. One of the six power projects was found to be 234 per cent expensive than a similar project in India, the study revealed. None of these projects were offered under bidding as it is being funded by a single country, according to inquiry report.

The inquiry report revealed that the $1.7 billion power transmission line project of the China-Pakistan Economic Corridor (CPEC) was 234% expensiv ..

also alleged that government-to-government deals signed under CPEC had unduly favoured Chinese investors. One of the six power projects was found to be 234 per cent expensive than a similar project in India, the study revealed. None of these projects were offered under bidding as it is being funded by a single country, according to inquiry report.