COMMENT
The successful completion of Rs22 billion Turbat-Hoshab-Sorab section of the western route under China-Pakistan Corridor Project (CPEC) in a record two year time has changed the perception that the federation is less concerned about the rights of the three smaller provinces.
However, it was the real test of the federal government to deal with a number of important issues in the meeting of the Council of Common Interest (CCI) that met last week under the chairmanship of the prime minister.
Now the question is whether the three major differences - CPEC projects, profit of the hydropower projects, and the royalty of oil and gas to Sindh and Baluchistan - confronting the federation were resolved.
The 30th meeting of the CCI is being held after a pause of nine months against the mandatory limit of every quarter of the year. It met last on March 25 after about a year, which is against the spirit of the constitution. The delay in regularly convening the meeting of this apex body often results in more bickering between the federal government and the provinces.
After CCI, the Economic Committee of the National Economic Council (ECNEC) is another important forum which does not meet twice a year as per constitutional requirement. This also causes friction and heightens the perception that the federal government is only interested in benefiting Punjab at the cost of the other three provinces.
One of the major issues confronting the Council of Common Interest meeting was the determination of import requirement of the fuel cost of 10,000MW power projects. According to an insider, the government needs $3.5 billion to meet the fuel import cost of CPEC power projects. The import of machinery, he pointed out, will be financed by Chinese loans, but the government has to arrange the $3.5 billion to import fuel. “This is a very crucial undertaking and I don’t know how the CCI will deal with this issue, especially when there is already a pressure on foreign exchange reserves,” he said.
The China-Pakistan Economic Corridor project has three major financing components - loans, equity and investment - and there is confusion from day one about its details relating to the rate of return and the interest payment the government will have to make over the years.
If the Prime Minister’s Advisor on Foreign Affairs is to be believed, loans being acquired under China-Pakistan corridor projects will be returned with two percent interest rate during the next 20 to 25 years time. Since the issue is very important, the CCI is expected to be informed, especially about $28 billion early harvest projects, which also includes $16 billion foreign direct investment (FDI).
Amid the financial confusion, there are also disputes between Punjab and other provinces on route prioritisation of the CPEC. Khyber Pakhtunkhwa had blamed the federal government of ignoring smaller provinces by not prioritising the western route and had even approached the court to resolve the matter.
Reports also suggested that CPEC funds were being diverted to the multi-billion Orange Line project and that the eastern route was being given priority due to the government’s Punjab-centric approach.
The perception has been that the proposed industrial parks and economic zones and other supporting components of China-Pakistan corridor, including energy projects, railway tracks, and gas pipelines were not being located along the western route.
Questions are also being asked as to why no money comes from $11 billion loans that were taken for infrastructure development, forcing the federal government to earmark Rs15 billion out of its Public Sector Development Programme (PSDP). Since the government is facing financial crunch due to fall in FBR revenues, it made available only Rs1.6 billion out of Rs15 billion for this purpose.
Security concerns are also a big part of the CPEC-related matters. The government needs to raise a big amount for the security of CPEC for which it has asked the provinces to cough up their share in the proposed National Finance Commission (NFC) award. However, provinces are not prepared to oblige and the matter would likely be discussed in the upcoming CCI meeting.
The issue of hydel profit is another of the important issues. Punjab this time around looks determined to seek royalty from 1,400MW Ghazi-Barotha Hydropower Project. The transfer of price formula from income of dams, and if WAPDA would pay this to the provincial government, was yet to be determined.
Since Wapda has been facing funding problems, it argues that to pay royalty, it would have to borrow, which would be outside the budget. Experts say that Wapda officials need to increase their tariff instead of going for new borrowing.
As regards the payment of oil and gas royalty, Khyber Pakhtunkhwa and Baluchistan have been receiving Rs100 billion, but since last year, they are receiving flat funding and there is no growth in it, an issue they reportedly raised in the Council of Common Interest meeting. The prime minister has been urged to remove the apprehensions of the smaller provinces whose officials believe that Punjab is moving ahead in every respect, while the rest of the three provinces are much behind in terms of development and progress.
The smaller provinces are seeking guarantees from the prime minister that the revenue generated from the motorway on eastern route, will be used to upgrade the western route to become a four-lane and subsequently a six-lane motorway route; and that railway tracks will be laid from Gwadar to Peshawar through Quetta and Dera Ghazi Khan.
The writer is a senior journalist based in Islamabad
