Lack of funds: China upset over delay in $2b Gwadar project

China is reportedly disappointed about the delay in decision making about giving the $2-billion commercial contract that includes laying a gas pipeline and setting up a LNG terminal in Gwadar

A senior government official said that while a Chinese firm had submitted the commercial bid for the contract, but no decision has been taken on the contract, much to the dismay of the Chinese side.

The LNG Gwadar pipeline project was planned as an alternative solution to the Iran-Pakistan (IP) gas pipeline project, which has not moved ahead due to sanctions against Tehran.

The official said that the Chinese side had asked Pakistan to apply for the loan, but this process has been delayed as the government wanted to have the PC-1 approved from the Planning Commission.

One minister in the government has slowed the process by not releasing funds.

Under the agreement, the Chinese side is to provide 85% financing under the government-to-government deal to implement the LNG Gwadar terminal and pipeline project. The finance ministry, however, is reluctant to release the remaining amount.

The China Pipeline Bureau (CPB) was designated by the Chinese government to implement the project. Officials said that Chinese banks had offered financing at the rate of Libor plus 2.25%. The official said that the finance ministry was to arrange 15% financing through Gas Infrastructure Development Cess (GIDC) levy being collected from gas consumers for gas import projects. But the finance ministry had consumed all these funds, which amounted to Rs183 billion, for projects like the Metro bus.

The official said that the petroleum ministry had moved a summary to the Economic Coordination Committee, requesting to expedite the project and issue directions to the EAD to arrange loans for the project. The ECC approved to give sovereign guarantee after several months had already been wasted.