Gilgit-Baltistan: ECC Decides to Facilitate ADB Lending to GB

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Islamabad (BR): Economic Co-ordination Committee (ECC) of the Cabinet has decided to treat Gilgit-Baltistan at par with AJ&K with regard to foreign re-lent loans aimed at facilitating approval of Asian Development Bank’s loan for two small hydropower projects, official sources told Business Recorder.

The decision was taken on the request of Chief Minister Gilgit-Baltistan who wrote a letter full of province’s woes to Finance Minister, Senator Ishaq Dar also the Chairman of the ECC.

Chief Minister, in his letter stated that the meeting for loan negotiation and its finalisation process with the ADB for two small hydropower projects (HPPs) of Gilgit Baltistan namely 26MW Shagharthang Skardu and 4MW Thack Chilas was convened on June 17, 2013 but was postponed due to the issue of relending and repayment of the loan by the GB government as per GoP policy for other provinces of Pakistan, as it was not included in the draft loan agreement earlier circulated for comments.

A meeting in the Ministry of KA&GB was held on June 25, 2015 chaired by the Secretary GBWPD and it was decided to move a summary for consideration of ECC regarding relaxation of the policy keeping in view the special status of GB.

Accordingly a summary was submitted by the Ministry of KA&GB to the ECC with the request that the GB projects be exempted from the condition of relending and repayment by the GB government and GoP may pick up the loans of GB projects for their repayment but unfortunately during the meeting on August 15, 2013 ECC rejected the proposal of KA&GB. GB government feels that the decision of ECC would adversely affect the hydropower development activities in GB due to its meager resources and the energy requirements of the poor people of GB would never be fulfilled and the dependence on fuel wood would also increase causing deforestation and environmental problems besides increasing poverty due to cutting of orchards and erosion of valuable cultivable lands.

Chief Minister GB requested that the ECC should review the decision of August 15, 2013 on the following grounds:- (i) ( GB does not possess a status equivalent to other constitutional provinces of Pakistan. The Self Governance and Empowerment Ordinance 2009 do not confer GB a status equivalent to other provinces. It is merely an administrative arrangement keeping in view the far flung locations of GB; (ii) GB has no indigenous financial resources and totally relies on the routine annual federal grant provided in shape of block provision to meet their development and non-development expenditures; (iii) The GB government has neither taxation outlay nor gets any share from the National Finance Award(NFC); (iv) The revenue returns from the sale of electricity produced from these projects will be meager due to the fact that the consumers will be mostly domestic subsistence users and there exist no industries and other load diversity like other provinces. However, it is a future vision to establish a regional grid and its further inter-connection to the national grid on availability for resources to promote private investment in the hydro sector to supply electricity to the national grid and contribute towards minimising the energy crisis in the country. In this way GB will also earn revenue on account of sale of energy to the national grid like other provinces and AJK; (v) GoP has not provided a single KW of electricity to GB since independence. All provinces ie KPK. Punjab, Sindh and Balochistan are connected to the national grid. Even AJ&K and FATA are connected to the national grid and all of them are enjoying equitable load shedding as per policy of the government. Wapda is a federal entity with the mandate to generate electricity and supply equitably to all the parts of the country on one grid yet GB is deprived. GB is neither connected to the national grid nor GoP has allocated any special funds in the past to resolve the energy issue of GB and the area is totally ignored; (vi) GB is developing its own micro and small hydropower projects to meet its energy demand from the block amount provided by the federal government on annual basis curtailing share of other important sectors such as education, health, water supply, irrigation, population planning etc whereas no other provinces utilise the block provision for development or energy projects, GB therefore deserve special dispensation; and (vii) the ECC decision is not in line with the GoP policy for equitable supply of electricity for the entire country as GB is not getting any electricity from the national grid whereas a huge amount on account of energy mix subsidy and circular debt is being borne by the GoP for other four provinces, AJK and FATA. GB therefore deserves special attention of GoP in the energy sector including exemption from repayment of loans of hydropower projects.

Gilgit- Baltistan government further stated that Asian Development Bank is ready to finance two projects of GB through REDSIP tranche-III for which umbrella agreement already stands signed with the GoP. Once this loan is availed for the GB projects it will be easier for GoP to get financing from international donors for other mega projects in GB territory such as Diamer Basha Dam and Bunji Dam on the same analogy.

Chief Minister GB requested that foreign funded projects in his province may be exempted from the condition of relending and repayment by the GB government and GoP may pick up the loans of GB projects for their repayment and ECC should review its decision of August 15, 2013 on compassionate grounds.

The sources said, Finance Minister as Chairman ECC approved the proposal of Chief Minister GB and tabled the case in the ECC in its meeting on July 4, 2014. The ECC also endorsed the decision of the Finance Minister which is as follows “in case of AJ&K, the Annual Development Program (ADP) is funded through Cash Development Loan (CDL)/ foreign relent loan. However, for debt servicing by AJ&K government, federal government makes necessary allocation in the budget as ‘ways and means advances’ and repayment principal/ mark-up are made by the federal government through book adjustment. The same mechanism may be adopted for foreign relent loans of Kashmir Affairs & Gilgit-Baltistan.”

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