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Updated: Jan 14, 2019 17:24 IST

The cash-strapped Pakistan government will shelve a major coal-based power plant project under the $ 60 billion China-Pakistan Economic Corridor, citing sufficient generation capacity already lined up for the next few years.

The CPEC, which connects Gwadar Port in Balochistan with China’s Xinjiang province, is the flagship project of Chinese President Xi Jinping’s ambitious Belt and Road Initiative (BRI).

The previous Pakistan Muslim League-Nawaz (PML-N) government had pushed for the construction of the 1,320 MW Rahim Yar Khan power project by China.

The Pakistan Tehreek-i-Insaf (PTI) government of Prime Minister Imran Khan officially conveyed to Beijing that it was no more interested in the project in view of sufficient generation capacity already lined up for the next few years, the Dawn reported.

It has requested the Chinese friends to formally delete the project from the CPEC list, the report said.

During the 8th Joint Coordination Committee (JCC) meeting held last month, a Pakistani delegation led by Minister for Planning and Development Makhdoom Khusro Bakhtyar “proposed to remove the Rahim Yar Khan imported fuel power plant (1,320MW) from the CPEC list, in order to provide structure optimisation space for the subsequent power market of Pakistan,” said an official, quoting minutes of the December 20 JCC meeting.

The Chinese side suggested that a joint study on optimisation of energy mix be carried out at the earliest.

Cash-strapped Pakistan is negotiating a $8 billion bailout package from the International Monetary Fund (IMF) to overcome a severe balance-of-payments crisis that threatens to cripple the country’s economy.

The government reached out to some “friendly countries” for economic assistance including Saudi Arabia, China and the UAE since Prime Minister Khan assumed office in August.

The project was originally pushed as imported coal-based plant by Quaid-i-Azam Thermal Company of the Punjab government led by PML-N president Shahbaz Sharif who used to attend meetings of the Cabinet Committee on Energy led by his brother and then prime minister Nawaz Sharif.

A leading business tycoon had proposed the project and was expected to be one of the key sponsors.

The project was removed from the CPEC priority list when then bureaucracy highlighted that surplus generation capacity had already been contracted and more contracts would lead the country to ‘capacity trap’.

The government had already notified a ban on capacity addition on imported fuel as early as June 2016 and the Rahim Yar Khan and Muzaffargarh coal-based plants were removed from the CPEC priority list, the report said.

Among other reasons, this led to unceremonious removal of the then power secretary and head of the National Transmission Company — the system operator.

The Punjab government had pushed for revival of the plant which was included again in the priority list in subsequent CPEC negotiations, according to a federal secretary.

It was not needed at all and would have been a burden on the already deteriorating financial condition of the power sector, he said, adding that Diamer-Bhasha dam was also included in the CPEC list when the coal-based projects were removed, but the dam project could also not move forward under the CPEC for unrelated reasons.

The official said the PTI government had already made up its mind to remove almost 400 “politically motivated” projects from the development portfolio as part of a comprehensive mid-year review of the Public Sector Development Programme later this month.