Intervention from China upended Imran Khan’s grand plan to probe power firms

Prime Minister Imran Khan stalled action against independent power producers accused of making billions of dollars in questionable deals after a clear warning from Beijing that the probe could turn out to be counter-productive, people familiar with the developments told Hindustan Times on Saturday.

On April 21, the Imran Khan government ordered a probe after an inquiry committee set up last August estimated that the country lost over Rs 4 trillion due to circular debt and subsidies to power producers including those from China.

The inquiry panel had been mandated to figure out why consumers in Pakistan had to pay one of the highest tariffs in the region. It said that 16 independent power producing companies (IPPs) invested around Rs 60 billion and earned over Rs 400 billion in profits in a period ranging from two to four years.

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But this week, Khan deferred action on the inquiry panel’s report by two months.

Pakistan information minister Shibli Faraz told reporters on Tuesday that the decision to postpone the inquiry was taken due to the government’s focus on measures to fight Covid-19.

“We will not leave it unattended,” he told a news conference in Islamabad, according to news agency Reuters. The minutes of the meeting accessed by the news agency indicated that the two months time was given to provide for “meaningful negotiations” with the power companies including those from China.

Diplomatic sources in New Delhi and Islamabad told Hindustan Times that the decision to hit pause came after Chinese ambassador Yao Jing intervened and conveyed his government’s strong views on the direction of the exercise.

The ambassador is learnt to have cautioned Islamabad that action against the Chinese power firms would be counterproductive and told Islamabad to work with the power firms.

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Following this intervention, Islamabad also decided against going public with the formal release of the inquiry report.

But the report of the panel headed by the Mohammad Ali Commission had already leaked by then.

Around 40 independent power producers operate in Pakistan. Company representatives have consistently rejected allegations of wrongdoing.

China’s interest in Pakistan’s power

Of the 17 projects under the China-Pakistan Economic Corridor, eight are already operational. The IPP inquiry report went into some detail into two coal-based plants that cost Pakistan about US 1.9 billion each. The 1,320 MW Sahiwal coal power plant in Pakistan’s Punjab is run by Huaneng Shandong Ruyi (Energy) Limited. The Port Qasim Energy Holding, financed by China Power Construction Corporation/Sinohydro Resources Ltd, also a 1,320 MW plan, is located 37 km from Karachi.

The inquiry report alleged falsifying financing costs for construction of the plan as well as incorrect calculation of the internal rate of return. These calculation errors alone could cost Pakistan nearly Rs 160 billion over 30 years, the inquiry report said. It also recommended that Rs 32.46 billion be deducted from the project cost of Sahiwal and Port Qasim plants and the tariff for power from these plants be adjusted to recover excess payments already made by the government.