This article is right now a “stub” i.e., being developed. But we are posting it online as it is being written so any comments can be incorporated.
This article is part of our CPEC watch series.
As you may be aware, bulk of the CPEC dollars go into energy sector projects. Of the $50b or so earmarked for CPEC, $30b is for such projects. Bulk of this money goes into coal based thermal power projects.
Ignoring the small ones, here is a quick summary of the major projects.
|Name||Cost ($b)||MW||Tariff (c/Kwh)||Remarks|
|Port Qasim||2.08||1320||8.12||LIBOR + 4.5% rate for this & most other projects listed here! Plus 7% insurance on interest!|
|Thar 1||2.0||1320||8-8.5||Some reports say PKR 8 which is slightly less.
34% ROI guaranteed!
|Thar 2||1.1||660||8-8.5||Plus mine $800m|
|Sahiwal||1.8||1320||8.36||27% ROI Guarantee!|
|Suki Kinari Hydro|
Update Jan 2017: As per this article, some of the projects (actually amounting to 50% of generation capacity) would be delayed by at least a year. A new list of projects as of date will be made presumably in February.
How does Pakistan benefit?
Reading the mainstream Pakistani press or listening to its politicians and Generals, you can conclude CPEC is the magic bullet that will transform Pakistan into another Switzerland or Singapore or may be both. The Pakistani intellectual class has been raising some hard questions, although quietly. The religious right is so far sold on the benefits though that could change fairly quickly.
We can look at 3 possibilities:
- Energy projects are simply a way for China to dump its excess capacity and grab juicy contracts for its manufacturing sector floundering on reduced domestic demand and worsening international market. It is using the carrot of CPEC to extract this benefit from the Pakistani Generals.
- Pakistan is throwing this as a sweetener willingly to be eligible for the strategic (and military) benefits that accrue from the CPEC’s non-energy part. This essentially means tying up China and its powerful military-economic complex to secure Pakistan’s interests particularly vis-a-vis India. That is why they are not de-linked from CPEC nor are subject to any competitive bidding or transparent procurement norms.
- It is China that is throwing money at Pakistan by funding all these energy projects, so that Pakistan can be persuaded to literally hand over the CPEC route to China. After all, why should the Abdul on the streets of Pakistan care if China benefits from a shorter route to the Gulf?
Of the 3, we can straightaway rule out (3). While it is hard to compare projects across time and geography, that too with numerous variables such as coal linkages, ports and rail handling infrastructure etc., simple back of envelope calculations show these projects are nearly twice as expensive as comparable NTPC (India) ones. (Note: We would be happy to stand corrected if this is wrong).
The tariffs too are much higher (8-11 US cents) whereas NTPC has been having trouble selling power even at 7c (INR 4.3) and falling, since prices are even lower in the open market in India (INR 3.5)! Recent solar bids are also lower than this price!.
Therefore one can venture to say Pakistanis are royally screwed, even without counting the extra security and other invisible costs. Remember, these costs are in dollars and will keep fluctuating (mostly increasing) with time. Even if these worst case theories are wrong, it would indeed be quite safe to conclude that China is not at least throwing its hard earned money at Pakistan.
(1) and (2) hardly make any difference in terms of actual cost to Pakistan, only its acceptability, although Pakistani aam Abduls have been sold on theory (3) and the fact that China has been so kind and benevolent. The question then boils down to the benefit that come with such costs.
It is interesting to note that while the rest of CPEC will take a long time to come to fruition, the energy aspects are being fast tracked with supposedly quick win benefits for Pakistan. The general elections due in 2018 in Pakistan obviously has a significance too.
Note also that some of these projects pre-date the CPEC or even the OBOR and have been grand-fathered in to make the CPEC sound bigger and ride on the publicity bandwagon.