The request to renegotiate followed an inquiry headed by a former chairperson of the Security and Exchange Commission of Pakistan (SECP) that revealed
widespread malpractice in the power sector.
Sixteen IPPs invested around 60 billion rupees and earned over 400 billion rupees in profits in
a period ranging from two to four years.
The same report pinpointed a loss of $26.1 billion to the state from the power sector over the last
13 years through inflated reporting of overhead expenses and operational costs, including for fuel consumption, bank fees and power generation costs used to calculate state subsidies.
The committee said power producers accrued over $26 billion in debts taken from banks to establish power units under the CPEC and subsidies to pay the power purchase agreements reached with the IPPs.
The report disclosed that some 16 IPPs, including seven Chinese ones, made “windfall” profits over a two- to four-year period. Although their
agreements said they could make between 12-15% profits over their investments, some reaped profits of between 70-90%, according to the report.
reports suggest that Beijing has refused to budge on Islamabad’s request to renegotiate the power purchase agreements, saying that any debt relief would require Chinese banks to amend the terms and conditions under which the credits were extended.
The banks, including China Development Bank and the Export-Import Bank of China, were not prepared to revise any of the clauses of the agreement reached
earlier with the government, Beijing said in response to the request to renegotiate terms.
That unrelenting line is believed by analysts to
be in line with Beijing’s “rethink strategy” of its $1 trillion Belt and Road Initiative. Beijing is under pressure at home for the scheme’s financial loss-making projects and at the same time politicized criticism that its related
loans create “debt traps” for recipient states.
Pakistan Tehrik-e-Insaf (PTI) Senator and industrialist Nauman Wazir told Asia
Times, “First, the tariff determined by National Electric Power Regulatory Authority (NEPRA) at the time of allowing power generation in the private sector was on the very high side.
“Then, the IPPs submitted erroneous declarations concerning capital, financial assets and operational cost of the company, which became obvious when the balance sheets of the IPPs were made public,”
he claimed citing evidence that came to light when an inquiry committee on Pakistan’s power sector revealed its findings last year.