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CPEC and CPEC Authority

The Pakistan-China Relations Steering Committee in its meeting, held early this week under its Chairman Asad Umar, has set a one-month deadline for the Power Division to devise a policy to deal with the problems of delay in achieving Commercial Operation Dates (CODs) of five power projects with a generation capacity of 3,600MW being executed under the China Pakistan Economic Corridor (CPEC).  The five power projects being 884MW Suki Kinari hydropower project (10 months delay), 720MW Karot hydropower project (four months delay), 330MW Thar Block-II (12 months delay), 330MW Thal Nova Thar block-II (15 months delay) and 1,320MW Thar Block-I (12 months delay). All these projects are of high strategic and commercial importance.

The reasons for the delays are reported to be overall slowdown of the work on the CPEC projects, Covid-19-related delays, bureaucratic hurdles at Federal and Provincial levels, absence of 660KV HVDC transmission network to evacuate the power and even workers’ strikes at some projects.

The growing frustration among our Chinese counterparts at these delays is quite understandable. Specifically, the delay in achieving a COD has serious contractual and financial consequences in terms of performance bonds and guarantees by the suppliers, commitments to lenders, penalties and additional financial burden on account of cost and time escalation. All this affects the project feasibility. The ministry and the other related government entities lack capacity to appropriately fathom and comprehend the sensitivity of the consequences of delays.

To streamline and expedite CPEC projects on a fast track, the government through an act of parliament, established the CPEC Authority for the planning, facilitation, coordination, monitoring and evaluation of CPEC projects; it is meant to act as a one-point interface to the Chinese counterparts on all CPEC matters. All of this is not effectively happening. The implementation and enforcement of CPEC project continue to vest in the line ministries and other related government entities, functionaries and regulators. This is the major faultline in the CPEC landscape resulting in sluggish delivery. The project implementation organisational structure is too bureaucratic while the regulatory framework is superfluous.

Implementation and managing costs and timelines constitute the weakest point all along the bureaucratic hierarchy, processes and systems. It gets worse when it comes down to financial and technical management projects and their execution. Inherently, bureaucracy is not tuned to perform such functions and it is a mistake to expose bureaucrats to these challenges. This needs to be changed not only for CPEC but for all Public Sector Enterprises (PSEs) engaged in businesses, project management and commercial activities.

CPEC Authority has to be empowered as a sole authority which calls all the shots on all matters related to the CPEC. Apart from sovereign functions like Water Use Agreements with provincial governments, Power Purchase Agreements with Central Power Purchase Agency (CPPA) and Implementation Agreements with Private Power and Infrastructure Board (PPIB). Besides these functions the entire implementation, enforcement and regulatory responsibility should be placed under CPEC Authority and all government entities and functionaries should accordingly align themselves in support of CPEC Authority. This change would require going through the cumbersome process of seeking amendment to the act by parliament, but it is inevitable if CPEC has to be moved ahead on fast track – which it must.

Farhat Ali, "CPEC and CPEC Authority," Business Recorder. 2021-08-07.
Keywords: Economics , Economic growth , Economic zones , Economic activity , Economic conditions , Sales tax , Stat Bank , Fedral Budget , Economic Corridor , GDP , PSE , CPEC , PPIB Economic Policy , IMF , CPI , SBP

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