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Iran may finance three energy projects worth $330 million

By Ijaz Kakakhel

ISLAMABAD: Iran has indicated its willingness to finance three projects related to development of energy infrastructure in Pakistan by utilizing $330 million total pledges made at Tokyo Donor Conference, officials sources told Daily Times here on Monday.

The Iranian commitment of $330 million consists of $10 million as grant (project mode), $120 million as project finance and $200 million as trade finance. The Iranian government identified utilization procedures for grant ($10 million), which include provision $3 million in 2010, another $3 million in 2011 and $4 million in 2012. Officials in the Economic Affairs Division (EAD) told this scribe that Irani counselor in Islamabad informed them that they would like to fund health and education sector projects in Balochistan from their grant. The government of Balochistan had been requested to send the portfolio of viable projects in health and education sectors for the grant portion.

The Iranian government still not provided any detail of time frame and spending of project finance ($120 million) and trade finance ($200 million). However, Iran hinted that the project loan would be utilised mainly for energy related and infrastructure development projects. The project loan will be hard loan but the terms of loan were still not clear, however, it would be around 3 percent to 4 percent fixed interest rate. The officials further claimed that Iran had indicated its preference for funding three projects out of the loan assistance.

The officials claimed that the Iran might assist Pakistan in supplying 100MW electricity to Gwadar Port in Pakistan in order to ease the growing power crisis there. All the groundwork in this connection had been completed and the power supply would start as soon as Pakistan finalised work on transmission lines.

Iran also expressed its desire to finance the construction of SEHRA hydropower project in AJ&K by an Iranian company costing $350 million. The Iranian company as an IPP project was constructing the said project. The Sehra project has 65MW power generation capacity.

Sources further claimed Iran expressed its willingness to finance the construction of Noshki-Dalbandin Road in Balochistan (cost of the project is $50 million). They claimed that provision of electricity to Gwadar Port and construction of roads would further enhance trade and economic activities in Balochistan, which would help in removing deprivation of the province.

The Iranian indication of utilising $200 million as trade finance is meant for increase in bilateral trade between the two countries that is already being performed under Pak-Iran Preferential Trade Agreement. Iran has already indicated Pakistan supply of furnace oil on deferred payment.

The officials claimed that there was a possibility that Gwadar Port would be linked with Iranian Port in Chabahar that would bring enormous economic benefits to the two countries. Under trade finance, the officials expressed the hope that Iran would facilitate Pakistan as a transit to export its commodities to Turkey and offered the government's full cooperation to the Iranian traders in their efforts to get access to the Chinese markets.

The government of Pakistan has told Iranian government that the issue of transmission line and construction of road projects in Balochistan was being undertaken with WAPDA and National Highway Authority (NHA). In addition, the officials claimed that Pakistan would also propose Public Sector Development Project (PSDP) funded projects to Iran for funding.

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