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CPEC Authority to be expunged in light of Pakistan’s dues to Chinese power producers

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The China Pakistan Economic Corridor (CPEC) Authority – established in 2019 with the aim to accelerate pace of CPEC activities – will now be expunged following Pakistani Prime Minister’s approval. The new government’s Planning Minister Ahsan Iqbal passed the order on Wednesday,bto the concerned officials to abolish the Authority for being ‘a redundant organisation’ that wasted resources and prevented speedy implementation of the CPEC development activities. The minister’s decision was in light of Rs. 300 billion due towards the Chinese power producers, which has led to shutting down of almost 2,000 megawatts electricity production capacity.

Apart from accelerating the pace of CPEC activities, the Authority was responsible for seeking and implementing new growth drivers, and unlocking the potential of interlinked production networks & global value chains via regional as well as global connectivity. The previous Tehreek-E-Insaaf government took almost 2 years to set up the Authority, which remained dormant for most of its existence.

The CPEC connects Xinjiang province in China to the Balochistan province in Pakistan, with an array of energy and infrastructure projects that cost nearly USD 60 billion. China has already sent almost USD 28 billion worth of funds for different projects to Pakistan and a number of Chinese nationals are currently working in Pakistan.

It was during the first briefing on the state of affairs that the officials told the new PML-N government that over 37% of the power production capacity at Hubco, Sahiwal and Port Qasim was shut down due to non-payment to the Chinese investors and the shortage of fuel. The minister was informed that total receivables of the 10 Chinese IPPs have shot up to Rs. 300 billion, out of which the overdue amount was Rs 270 billion. The matter was informed to the former Finance Minister who made a partial payment of only Rs. 50 billion.

According to the briefing, the CPEC projects were facing delays due to the change in taxation policies by the previous government in violation of commitments given to China. The PTI government had last year withdrawn the sales tax exemption on imports.

The planning minister also expressed his displeasure over the ‘sluggish progress’ of the CPEC projects, saying that there was “zero progress on industrial zones being set up at Port Qasim, Islamabad and Mirpur”. According to the initial CPEC layout, SEZs were supposed to be ready to operate by 2020, but there was no progress in that direction in the last 4 years.

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