As China halts the multi-billion dollar China-Pakistan Economic Corridor (CPEC) over differences in cost estimations and contractual disputes with Pakistan, the issue of overdue payments owed to Chinese independent power producers (IPPs) is near a breaking point.
Citing media reports, Asia Times reported that Beijing is reluctant to pump in new funds under the CPEC arrangement until problems faced by Chinese investors are resolved and previous CPEC-related agreements are fully honoured by Pakistan.
Last year, Pakistan pledged to pay USD 1.4 billion due to Chinese power plants against accumulated owed dues of USD 2.3 billion during a meeting of the 10th Joint Cooperation Committee of the CPEC.
Earliar, the China Pakistan Economic Corridor Authority has urged the Central Power Purchasing Agency-Guaranteed (CPPA-G) to pay overdue receivables of IPPs established under CPEC, warning that the plants may go into default because of rising prices of coal in the international market.
Islamabad is also committed to opening a revolving fund equal to 21 per cent of the cost of power generation. In December 2021, CPEC Authority proposed that overdue payments need to be made to the IPPs urgently as with pending claims, Sinosure, could not support new projects in Pakistan anymore, Business Recorder reported.
Beijing has heavily invested in the CPEC as a short route that allows it to avoid the circuitous Gulf of Malacca and the South China Sea region, according to experts.