LAHORE: A leading Chinese company has drastically slowed down work on the $2 billion 660kV high-voltage direct current (HVDC) transmission line from Lahore to Matiari due to various problems, including differences with the government over size of a revolving fund.

For its part, the government has decided not to enter into an agreement over another HVDC transmission line of 660kV (between Port Qasim and Faisalabad) with the company till the completion of the first line (between Lahore and Matiari), according to sources.

The 878km Lahore-Matiari transmission line is part of the China-Pakistan Economic Corridor (CPEC) and is the country’s first project based on direct current (DC). The line will have capacity of transmitting about 4,000MW of electricity.

The Port Qasim-Faisalabad transmission line is also part of the CPEC and has features similar to that of the first line.

Size of revolving fund, delay in building of power plants cited as main reasons

According to official sources, the sites where the Chinese company has either slowed down work drastically or stopped it altogether are near Balloki, Bhaipheru (about 50km from Lahore), and near Matiari (near Hyderabad).

Each site comprises 175 acres and is meant to be used for building two converter stations, for converting alternating current (AC) to DC and DC to AC. The government handed over the large pieces of land to the company in January this year.

The company started construction work there after getting a letter of interest from the government in February.

“The [Chinese] company has slowed down its work on these two major sites due to three major issues that are yet to be resolved. One issue is related to establishment of a revolving fund and the other to operation and maintenance of the project,” said an official of power division in the energy ministry.

The revolving fund, according to the official, is required to be set up for making payments to the Chinese company in case its bills are delayed. But the contentious issue is the amount of money to be allocated to the fund.

The Chinese want the government to quickly set up the fund, but the authorities want to deliberate on the issue well before taking a final decision on the matter.

“The second major issue relates to the operation and maintenance of the project. The Chinese want the government [National Transmission and Despatch Company or NTDC] to purchase spare parts from China on its own and supply it for the operation and maintenance of the project. But the government wants the Chinese to perform this job so that the company could be held responsible for related problems, if any,” the official explained.

The third issue is the delay in setting up of power plants, as four coal-fired power plants in Thar, which were earlier scheduled to be commissioned in May 2020, are now expected to be operational by November 2020.

“Actually this transmission line is supposed to evacuate power from these plants... The government thinks that if the transmission line is ready in May [of 2020] and the plants are not, it will have to pay over 90 paisa per unit in wheeling tariff, which will run into billions for a period of six months [from May to November 2020],” said the official.

“And there are chances of further delays in the commissioning of the power plants. That is why the official date for the start of the project, which has to be completed within a period of 27 months, is yet to be announced by the government.”

The official said that in view of the above problems the Chinese company had slowed down work on the two sites. It had even sent some of the engineers back to China and accelerated its efforts to get the pending issues resolved.

“It also continues to request the government to sign papers about the second [Port Qasim-Faisalabad] line at the earliest. But the government looks to be in no mood to sign them at the moment, as it urges the Chinese officials to wait for a final decision based on the future load after completion of the first line,” the official maintained.

Despite repeated attempts, the managing director of the NTDC could not be contacted for comments.

Published in Dawn, November 13th, 2017