ISLAMABAD: Pakistan is all set to explore an extension in the tenor of outstanding repayment of Chinese IPPs (Independent Power Producers) for five years to reduce the cost of electricity.
If Chinese IPPs concede, which seems quite hard, it could pave the way for a reduction in electricity per unit cost by Rs3 per unit. It is the only option for reducing the cost of electricity at the moment. Details available with The News on Monday shows that the current power tariff structure concentrated debt service repayments in the first 10 years, placing a substantial financial burden on consumers. By extending debt tenor, the burden can be unloaded by staggering it for five years from 2036 to 2041 but its impact will start occurring from the current fiscal year.
Pakistan will have to repay total outstanding amount to Chinese IPPs in the range of $15.4 billion till 2036 as it is projected to pay $2.23 billion in 2024, $2.13 billion in 2025, $2.03 billion in 2026, $1.89 billion in 2027, $1.57 billion in 2028, $1.3 billion in 2029 and $1.01 billion in 2030. After 2030, the repayment to the IPPs will start reducing at $0.96 billion in 2031, $0.78 billion in 2032, $0.57 billion in 2033, $0.5 billion in 2034, $0.37 billion in 2035 and $0.02 billion in 2036 under the existing arrangement.
Some estimates worked out by Pakistani side show that the repayment of outstanding amount for Chinese IPPs would be staggered if granted five year extension and the amount would be $$1.63 billion in 2024, $1.55 billion in 2025, $1.48 billion in 2026, $1.41 billion in 2027, $1.34 billion in 2028, $1.28 billion in 2029, $1.22 billion in 2030, $1.16 billion in 2031, $1.09 billion in 2032, $0.94 billion in 2033, $0.81 billion in 2034, $0.65 billion in 2035, $0.62 billion in 2036, $0.51 billion in 2037, $0.47 billion in 2038, $0.33 billion in 2039, $0.25 billion in 2040 and $0.01 billion in 2041. With the staggering the overall repayment will be increased from $15.4 billion to $16.62 billion with five year extension from 2036 to 2041.
Amid expectations to kickstart execution on second phase of China Pakistan Economic Corridor (CPEC) during visit of Prime Minister Shehbaz Sharif to China, Pakistan is expecting some movement for agreement to convene joint financing committee meeting for construction of Mainline-1 (ML-1). Pakistani side had granted its assent to PC-1 of ML-1 with estimated cost of $6.7 billion for execution in two phases. Under the IMF programme, there is a limitation on sovereign guarantees so the government may request the Chinese side to accomplish the ML-1 in more than two phases.
During the visit there is a business to business summit scheduled for relocation of industries in Pakistan. Pakistan will also request to China for launching feasibility study to convert imported coal to domestic coal and initially convert only 20 percent on local coal to help reduce reliance on imported coal.
When Federal Minister for Planning Ahsan Iqbal was contacted for seeking comments, he said that the ML-1 was on top priority of the government and it was expected that both the sides would achieve progress for moving towards it in substantial manner.
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