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Russian bank to provide financing for mega project to Pakistan

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ISLAMABAD:Pakistan and Russia took a pause for two days in the ongoing talks on the Pakistan Stream Gas Pipeline Project (PSGP) with both sides asking their respective legal teams to sit down and discuss and finalise every clause of the proposed draft of shareholding agreement, keeping in view the national and international laws, by Thursday morning.

And more importantly, the government has got an undertaking from all the members involved in the negotiations from both sides that they will not divulge to media persons any kind of information about the ongoing talks. It is important to know that the ongoing talks will last till October 28.

Sources said that a Russian-nominated entity, PAKSTREAM LLC, presented the briefing on its side of the draft for shareholding agreement. It was also noticed in the meeting that the government side adopted one step forward and two steps back policy, which irritated the Russian side.

To a question, the official said that the Russian GAZPROM bank will be financing the project and they (Russians) introduced their mechanism of giving loans on the second day of talks. The government wants the loans from Russian Financial Institutions against its shareholding of 74 percent, but delegation from Moscow wants the guarantee from Islamabad that Pakistan will not offload its share to a third party until it completes the repayment of the loan and mark-up.

The Finance Division, according to the top official, has utilized the amount of Rs325 billion collected under the head of GIDC (Gas Infrastructure Development Cess) from the gas consumers for the development of new gas infrastructure, which includes TAPI, IP and North-South Gas Pipeline, renamed as Pakistan Stream Gas Pipeline Project. Now the Finance Division wants debt from Russia for financing Pakistan’s shareholding, which may be up to $1.5-2 billion. It will be used for purchasing the pipeline and compressors. And the Russian side will also spend the amount of $700-800 million against its 26 percent shareholding in the project.

This is how the masses who had earlier paid to the government the amount of Rs325 billion as GIDC will again pay for the loans and debt servicing in the shape of transportation tariff, which may go up to $1-1.5 per MMBTU. And if the government manages to fully utilize the GIDC amount on the project, then the transportation tariff would have been nominal only to cater to the financial requirements of O&M (operational and maintenance) cost. However, the new situation poses the question as to what the government reply will be to the Supreme Court on utilization of GIDC.

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