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ADB to give $900 million for Jamshoro project

13 February, 2014

ISLAMABAD: Pakistan and Asian Development Bank (ADB) on Wednesday signed the Loan Agreement worth $900 million for Jamshoro Power Generation Project.

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ISLAMABAD: Pakistan and Asian Development Bank (ADB) on Wednesday signed the Loan Agreement worth $900 million for Jamshoro Power Generation Project.

Secretary Economic Affairs Division Ms. Nargis Sethi and Country Director, Asian Development Bank, Werner E. Liepach has signed the loan agreement in the presence of Finance Minister Senator Mohammad Ishaq Dar.  Later, talking to media, Finance Minister Senator Ishaq Dar said rejected the news that government has committed with International Monetary Fund (IMF) to increase the power tariff from next month (March). He admitted that bill collection of power sector has considerably reduced to 75 percent from earlier 87 percent. The power subsidy would go to Rs 600 billion from existing allocation of Rs 250 billion if government had not increased the power tariff last year, added the Finance Minister.

Ishaq Dar made it clear that government could not provide subsidy by taking loans and added that Economic Coordination Committee (ECC) of the Cabinet has not decided to withdraw subsidy for consumers using upto 200 units of electricity a month. He informed that government has allocated Rs 250 billion subsidy for power consumers during ongoing financial year 2013-14.

Talking about elimination of tax exemptions, the Finance Minister said that government could not withdraw tax concessions worth of Rs 500 billion in one go. The government is reviewing that from when to start abolishing tax exemptions and it would withdraw exemptions in three years.

He assured that government would reduce the average cost of production of electricity in next three to four years, as four independent power producers (IPPs)'s plants would transfer to coal in next two years. He said that currently Pakistan was producing maximum energy on furnace oil which is expensive adding that the government would go for energy mix to reduce production costs. He said that electricity of about 8000 megawatt would be added to the system by the fourth year of this government and it would be enhanced from current 14,000 to 40,000 in next ten years.

Senator Ishaq Dar said that Asian Development Bank (ADB) would provide $3.2 billion loans in next three to four years including $1.2 billion during ongoing financial year 2013-14 including Jamshoro Power Generation Project. Finance Minister admitted that government has violated the Fiscal Responsibility and Debt Limitation Act (FRDLA) 2005 and assured that government would bring debt to GDP to 60 percent in next three year. He said that government is simultaneously starting wok on Diamer Bhasha and Dasu dams, as he said ADB did not raise objection on Bhasha dam. "Asian Development Bank is supporting the government's plan of Income Support Fund".

Senator Ishaq Dar said that economy is on track due to the government's decision, as Large Scale Manufacturing sector has recorded 6.8 percent in first quarter (July-September) of the current financial year. Dar said the government was taking concrete measures to generate cheap electricity to overcome power crisis, adding various furnace oil power projects are being converted into coal based plants including establishment of Gaddani coal power park.

Speaking on the occasion, ADB Vice President Wencai Zhang said that Diamar-Bhasha project is important for Pakistan and ADB is waiting for study, carrying out by government.

He added that ADB would review how to help in Gaddani Power Park in future. He appreciated the economic policies pursued by the incumbent government. ADB is providing assistance in energy, transport, agriculture and other projects. He further said that project would boost low-cost power supply and improve country's energy mix. "Diversifying to coal will help the country to cut down its electricity generation cost and reduce its oil import," the ADB Vice President added.

According to press statement issued by Finance Ministry, through Jamshoro Power Generation Project two new supercritical coal-fired power generation units with the capacity of 2x600 MW will be constructed in Sindh province. The objectives of the proposed project are to increase affordable, reliable power generation and reduce power shortages in Pakistan. The project will be executed by Genco Holding Company Limited and implemented by Jamshoro Power Company Limited in Sindh. This will both create employment in Sindh and help solve our energy crisis. Meanwhile, according to press statement issued by ADB, "The project will boost low-cost power supply and improve Pakistan's energy mix. Diversifying to coal will help the country cut down its electricity generation cost, and reduce its oil import bill." ADB Vice President Wencai Zhang said.

Pakistan has been facing rising oil prices and declining gas reserves as well as tight foreign account situation, rendering the reliance on the import of oil to fuel power plants increasingly unaffordable. The country spends more than $14 billion per year on importing oil, a major part of which goes into power generation.

Chronic power shortages have often caused social unrest, and cost the country about 2pc of its gross domestic product growth each year. The 600-megawatt (MW) supercritical coal-fired power generation plant, using an 80/20 blend of imported sub-bituminous coal and domestic lignite when available, will be in accordance with international and national environmental standards. A more efficient and sustainable energy mix can spur economic growth and create employment opportunities for millions. The ADB's Board of Directors approved the Jamshoro power project in December 2013. The project is expected to be completed by December 2018. The Islamic Development Bank will provide $220 million whereas $380 million will be the government's contribution to meet the overall estimated project cost of $1.5 billion.

Courtesy: The Nation

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