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Monday Jan 11, 2016

Three confusions on CPEC confronted with reality check

Three confusions on CPEC confronted with reality check

By Ahmad Noorani

ISLAMABAD: In the ongoing healthy debate on the China-Pakistan Economic Corridor (CPEC), there may be some genuine reservations but there are three basic confusions baffling different minds.

The major confusion is regarding the share of the provinces in Chinese investment for energy projects. KP is not only a major beneficiary of the Chinese investment under CPEC, besides other investments, but it will also be on the top of the list among the four provinces in terms of long-term gains of these investments. Documents and figures prove that the long-term gains of KP as a consequence of the present Chinese investment under CPEC will be more than any other province after completion of all projects. These gains will come from energy projects, industrial parks, dry port as well as from toll and other profits.

Confusion-1: Punjab has bigger share projects from Chinese investment under CPEC — China is investing around $35 billion in different electricity production projects in the first phase. Documents prove that the claim of bigger share for the Punjab in these energy projects is a lie. Pakistan is not depending merely on Chinese investment but loans are also being acquired from international and regional financial institutions for completion of the ongoing power projects. Following is a province-wise brief of energy projects under progress right now along with production and total expense being incurred on them.

Sindh (10,250 MW) costing around Rs11.5 billion: Port Qasim Coal Power Plant 2,270 MW, Thar Coal Power Plant 3,300, Jamshoro Power Project 1,320, Wind Power Projects 500 MW, Nuclear Power Plants 2,200 MW, Lakhra Coal Power Plant 660 MW.

KPK (9,230 MW) more than $11.6 billion: Sukki Kinari Hydro Power Station ($1.8 billion) 870 MW, Dasu Hydro Power Project (around $8.6 billion) 4,320, Tarbela IV & V Extension ($928 million and $796 million respectively totaling $1.72 billion) 2,700 MW, KASA 1300 Transmission Line (more than $1.5 billion) 1000, Alai Khawar Hydro Power Project 121 MW, Khan Khawar Hydro Power Project 72 MW, Dabeer Khawar Hydro Power Project 130 MW, Gomalzam Hydro Power Project 17 MW.

Azad Kashmir (4,029 MW): Neelam Jehlum Project 979 MW, Karot Hydro Power Project 720 MW, Kohala Hydro Power Project 1,100MW, Mehl Hydro Power Project 590 MW, Azad Pattan Hydro Power Project 640 MW.

Balochistan (3,020 MW) costing Rs7.1 billion: Hubco Coal Power Project 1,320 MW, Gawadar Coal Power Project 600 MW, Pak-Iran Electricity Import (Phase-1) 100 MW, Pak-Iran Electricity Import (Phase-2) 1000 MW (excluding Gaddani).

Punjab (6,220 MW) costing Rs 6.9 billion: Coal Power Plants (Sahiwal and Salt range) 1,620 MW, Quaid-e-Azam Solar Park 1,000 MW, RLNG based plants 3,600 MW.

Gilgit Baltistan (11,917): Diamer Bhasha Hydro Power Project 4,800, Bonji Hydro Power Project 7,100 MW, Satpara Hydro Power Project 17 MW.

First of all, the debate on installation of energy projects in any specific province is futile as electricity generated anywhere will be injected into the national grid and will be available for all the provinces without any discrimination. The total production after completion of these projects will be more than the demand so no question about distribution or priority to use can arise.

Secondly, as elaborated above, investment in energy projects of KP is much more than the energy projects in Punjab. So all statements on this count were a simple attempt to fuel provincialism to achieve petty and momentary political gains. All energy projects in KPK are hydropower projects, very expensive but are long term and sustainable projects because of permanent input source. However, KP CM Pervaiz Khattak insisted on Sunday that his province was getting lesser share if compared to its genuine right. He said that he was never contacted as chief minister of a province with regards to CPEC.

All energy projects in other provinces are based on fuel and are short-term projects. Fuel may or may not be available or rates of fuel can fluctuate and can result in removal of the plant from merit order. Not a single energy project in any other province can give a permanent and guaranteed source of income to that province. However, in case of KP, the province will have a permanent source of income in the form of net hydel profit of production of some 10,000 MW electricity. KP was receiving only Rs6 billion in terms of net hydel profit for the last 20 years but the present government has increased this profit to Rs18 billion per annum. When KP will be producing three times of its present generation, its net hydel profit will jump to new heights.


The hydropower projects installed in KPK in 1960s and 1970s are still functioning. These new projects will also last for decades and will be a permanent source of income for the province. Not only this, projects launched by the present government will once again make the KP as the biggest hub of electricity production in the country. The electricity produced in KP will also be the cheapest. The LNG or coal-based projects in Punjab are temporary projects to address emergency needs. These power projects in Punjab are being installed at places where costs and lines loses of transmission lines can be minimized.

These projects will remain functional for around two decades and will be feasible only when fuel will be available on desirable rates. Coal and LNG based projects cannot be installed in KPK as these will not be feasible or financially viable in any way because of transportation/moving cost of input fuel. Strategically, power projects are scattered across the country to counter emergency situations. Big and more efficient hydropower projects, in addition to those discussed above, can be installed in KPK instead of installing LNG or coal based plants. According to officials, federal government in collaboration with China is already finalizing a study for the possibility of such hydropower projects in KPK. Officials say that so far results suggest that there is a room for production of more than 30,000 MW electricity. Such hydropower projects cannot be made in Punjab on this scale. Despite claims, the present KPK government could not add even 1 MW of electricity to the national grid by completing any hydropower project because of preoccupation in the D-Chowk sit-ins and now in a campaign regarding CPEC.

When there is no point to be raised against CPEC, another objection is made that some of the projects were planned during regimes of previous governments but the present government is taking credit for them and showing them as CPEC projects. There are hundreds of projects made on paper and were buried forever. What matters is the financial close of the projects and on-ground implementation. All the feasible and viable dead projects have been made alive by taking loans from international financial institutions, China and under CPEC.

Confusion-2: Government using Chinese investment under CPEC for only Eastern Route instead of Western Route passing from deprived areas of Balochistan, Fata and KP —

i) As a matter of fact, under CPEC, China wants to use the existing infrastructure of roads of Pakistan with some up-gradations for transportation from Khunjerab to Gwadar instead of constructing new roads.

ii)- There is no Chinese investment for constructing new roads. If one relies on documents and facts, this is either a misconception or a baseless propaganda.

iii)- The existing infrastructure of roads was already not sufficient for existing traffic flow so federal government was clear that despite China’s refusal to invest in new roads, Pakistan will have to construct new roads by completing its pending projects of highways and motorways from Karachi to Peshawar through its own resources and by acquiring loans.

iv)- As successive military governments and some democratic governments have not focused on development of Balochistan, so the infrastructure of roads in this province was very poor.

v)- In case of use of existing infrastructure of roads on Western side, Balochistan could have been ignored once again and thus for the first time the federal government immediately started work on some dead projects of construction of roads from Gwadar to Dera Ismail Khan which would be passing from entire Balochistan. It is called the Western route of CPEC.

vi)- After the start of construction of new roads in Balochistan, keeping in view density of traffic and expected early recovery of loans in very quick time on Western side, government also started homework on long pending projects of roads and motorways including sections from Karachi to Hyderabad, Hyderabad to Sukkur, Sukkur to Multan and Multan to Lahore and Faisalabad. All roads are being constructed by acquiring loans and only the Sukkar-Multan section of motorway will be built using loans from a Chinese financial institution. It will not be a Chinese investment.

vii)- Objection was raised that the road passing from Balochistan will be a smaller road as compared to the Eastern route roads passing from Sindh and Punjab. It was argued that Balochistan was already a deprived and long neglected area and construction of comparable six lane motorway from Western route on priority basis could play a key role in uplift and economic development of deprived province. This was undeniably a strong argument but huge funding in form of loans was required as China was not investing in construction of new roads.

viii)- All new roads, either on Western route or Eastern side, were being constructed by acquiring loans and loans were easily available for the Eastern route (passing through Punjab and Sindh) because of dense traffic flow and expected early recovery of loans.

ix)- So the best planning could be diverting revenues earned from Eastern route  to enhance Western route lanes; from existing two to four and then six lanes.

x)- As agreed in May 2015 APC, Prime Minister on November 27, 2015 directed to immediately start acquiring lands for a six lane motorway for the whole of the Western route, where a high quality two-lane road was already being completed. It was also directed on the same date that Zhob to Dera Ismail Khan Section of the Western route will be constructed as four lane carriageway from the very beginning. While the rest of the part of Western route will be made four lane road in next step and then finally will be converted into a six-lane motorway as the funds become available.

xi)- Facts and figures make it very clear that in the present situation of availability of funds and China’s unwillingness to invest in the construction of new roads, diverting whole funds to construct a six lane motorway on Western side can result in collapse of the whole project. No government invested in Balochistan in past and at present initial phase of a mega project of construction of road starting from Gwadar and passing from whole of Balochistan is about to complete. Given the financial situation of Pakistan, this road can be converted into a big motorway in phases but definitely in a very little time. If attempts to sabotage CPEC by demanding diversion of all funds for construction of a six lane motorway at this stage  succeed, the dream of well-being of Baloch people and the uplift and development of the deprived province will also be lost.

Confusion-3: KP and Balochistan will get only a road without additional facilities like railway tracks, industrial zones, oil and gas pipelines, fiber optic etc: At present, there is no project of construction of new railway tracks or new oil pipelines under CPEC. People are being misguided on this count. Existing railway lines are being upgraded across the country (including KP) by using loans from Chinese banks. There is a hilarious objection from KP CM that most part of railway tracks being upgraded are in Punjab or other parts of the country. It is obvious that up-gradation in other parts will not benefit travelers belonging to KPK as well and tracks are also being upgraded in KP. Also it is not possible that any new railway tracks will reach China without passing from KP but at present there is no such project.

Only one project of installation of fiber optic along with the CPEC route from Khunjerab to Islamabad is being undertaken and it passes through KPK. It will connect Pakistan with China through fiber optic. It is obvious that any new projects of installation of fiber will tackle the needs of all parts of the country like all other projects.

Yet another interesting objection is about “not constructing Industrial zones in KPK at priority”. Industrial zones cannot be developed in absence of electricity. At present Pakistan is facing energy shortages and there is loadsheding of five to eight hours. Obviously, at first energy projects will have to be completed. Construction of industrial zones is part of the second phase of CPEC. The federal government has asked the provinces to give feasibility report of sites of such industrial zones along with CPEC route so those can be presented in meetings of Joint Cooperation Committee (JCC) and then forwarded to working groups of businessmen from both the countries. Reportedly, the federal government has identified 27 sites for industrial zones along with CPEC route which include seven sites in Balochistan, three in Sindh, eight in KP and seven in Punjab. These sites are not finalised and are just proposed.

Real proposals are to be submitted by the provincial governments after proper planning but no real attention is being given in this regard and most of the focus is on politicking. Eight sites identified in KPK include marble and granite based industrial estate at Mansehra (80 acres, mining), industrial estate Nowshera (1,000 acres, manufacturing), expansion of Industrial Estate Hattar (424 acres, manufacturing), industrial estate at Chitral (80 acres, food processing) as well as Industrial Estate Ghazi (90 acres, manufacturing) and industrial estate Dera Ismail Khan (188 acres, manufacturing). Industrial estate at border of Kohat and Karak and industrial and economic zone at Bannu (400 acre) in KP have also been identified as sites for SEZ under CPEC.

As CPEC project is being expanded to central Asian states which border with KPK and Balochistan so these two provinces will benefit more than others given full attention is given on planning and making basic infrastructure instead of politicizing things.

In addition to these confusions, there are also some undeniable facts proved through official documents and statements. PTI chief Imran Khan and KP CM Pervaiz Khattak may be right in their views against some of CPEC projects, but it is absolutely wrong and baseless to say that KP CM was not taken into confidence regarding CPEC. It is a matter of record and confirmed by Prime Minister Office that federal government has officially invited Khattak to accompany Prime Minister to a China visit to discuss modalities of CPEC. However, the same offer was officially denied in categorical words. The government’s efforts for CPEC were ridiculed and CM KP continued to demand resignation of the Prime Minister from a container in D-Chowk.

Not only this, KP CM even refused to accompany Prime Minister to a visit to UK despite a request from Prime Minister Office. KP government was apprised of all developments and was repeatedly requested to provide details of its proposals for the sites of industrial zones but KP government’s level of seriousness towards the CPEC till November 2015 could be ascertained from the fact that when the federal government invited ministers to present projects in the fifth Joint Cooperation Committee (JCC) held in Karachi, only a parliamentary secretary was sent.—Originally published in The News

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