Govt may act as guarantor for AJK power projects

By Zafar Bhutta  in The Express Tribune, Sept 30

ISLAMABAD: The Economic Coordination Committee (ECC) is likely to approve government guarantees for building hydropower projects in Azad Jammu and Kashmir (AJK), meeting a key demand of foreign investors who are keen to invest in the state.

According to sources, the ECC will take up the issue in its meeting on Tuesday after foreign firms told the Ministry of Water and Power that international lenders were not willing to provide loans for hydropower projects in AJK because of the state’s legal status. They sought government guarantees to win loans and undertake the projects.

“The ECC’s green signal will also help bring funds for the 969-megawatt Neelum Jhelum hydropower project, located in AJK, which will pave the way for securing water rights over Neelum Jhelum River where India is building Kishanganga Dam,” a government official said.

Among foreign investors looking for investment opportunities, South Korea-based Star Hydropower Limited is seeking guarantees from the Government of Pakistan for investing in the 147MW Patrind Hydropower Project to be built on the boundary of Abbottabad and Muzaffarabad (AJK). The firm will complete the project in three-and-a-half years at an estimated cost of $400 million.

LNG import: The ECC will also consider a new initiative to import one billion cubic feet per day (bcfd) of liquefied natural gas (LNG) amid warnings from Dutch firm 4Gas – the developer of Mashal LNG project – that it will approach the international court if Pakistan went ahead with the new programme.

In a summary sent to the ECC, the Ministry of Petroleum and Natural Resources has proposed LNG import in three phases. Under long-term projects in two phases, 400 million cubic feet of LNG per day (mmcfd) will be imported in the first round and the same quantity in the second round. In addition to these, 200 mmcfd will be imported on a fast-track basis from international sources through direct negotiations, competitive bidding or spot purchases.

A deal may be struck for 10 years with a price review after every five years. Gas price will be determined on the basis of weighted average selling price and the cost of gas will not be passed on to consumers of other sectors.

New policy for motorcycle industry

The ECC will also consider a Ministry of Commerce proposal that new entrants to the motorcycle industry should be allowed to start production with 25% locally manufactured parts. They would take that level to 85% local parts at the end of five years of operation and those that failed to achieve the target would be penalised, the ministry said.

This policy will be applicable to motorcycles of 100cc and above capacity with new technology. However, existing motorcycle producers argue that the new policy will damage the industry. They allege that the policy is being framed to benefit an upcoming manufacturer, which is planning to produce motorcycles of more than 100cc capacity.

The ECC will also discuss a summary sent by the Production Division, seeking renewal of Rs2 billion worth of government guarantee for financially troubled Pakistan Steel Mills.

It will also decide whether to release latex foam imported from India by Shafi Lifestyle Limited, Lahore.

http://tribune.com.pk/story/444529/wooing-investors-govt-may-act-as-guarantor-for-ajk-power-projects/