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Pakistan signed an inter-governmental framework agreement with the government of Denmark for interest-free loans in renewable energy, energy efficiency, water supply and wastewater treatment sectors.

The Danish government would provide interest-free but tied loans up to but not limited to € 100 million. It includes a 35 percent concessionary element covering the interest on the loan, export premium, bank margin and an upfront grant. Notably, the agreement also includes transfer of technology and know-how from Denmark to Pakistan.

The framework agreement would act as an umbrella agreement for potential development sector projects emanating from it mainly in the sectors of renewable energy, energy efficiency, water supply and wastewater treatment sectors. Denmark has a long tradition of developing and using renewable energy.

Electricity derived from renewable energy has reached 67 percent of the electricity supply (wind energy contributes 46.8 percent while biomass contributes 11.2 percent and the rest solar and others). Denmark is a global centre of excellence for generating energy out of biomass. Biomass is used to heat buildings, supply process heat for industry and other residential and industrial consumption

In 2017, The Ministry of Renewable Energy of India and Danish Ministry of Climate, Energy and Utilities inaugurated the joint ‘Centre of Excellence for Offshore Wind and Renewable Energy’ in New Delhi. The vision is to become a nationally and internationally recognized, respected and leading knowledge hub working for a sustainable development of offshore wind energy in India. India will be one of the largest markets for renewable energy in the coming decades.

Tons of precious biomass in Pakistan is wasted in land filling whereas, billions of dollars worth of fossil fuel is imported to run its power plants. After many years of keeping the West out of business in Pakistan, the agreement with Denmark on renewable energy is a good beginning.

The financial package, the technology transfer and supplies offered by Denmark are outstanding and Pakistan must take all the required measures to have the project on ground soonest. Similar soft loans, supported by transfer of technology and supplies of quality, are offered by other countries, notably, Germany and Japan as well. Both, until a few years ago, were Pakistan’s main partners in energy and infrastructure sector development.

With country’s one-sided focus only on CPEC (China Pakistan Economic Corridor) the traditional partners from Europe and Japan shied away from Pakistan market. Since around a decade hardly any project has been supported in Pakistan by the said traditional partners.

While it is essential to remain focused on CPEC it is equally important to revive our relationship with the West and Japan and bring them on board in relation to development of our energy sector and infrastructure. Their financial terms, quality of supplies and transfer of technology offer a competitive advantage in favour of Pakistan which cannot and must not be ignored.

For far too long the fossil fuel and independent power producers (IPPs) lobbies abetted by vested interests have held the country stuck to a polluting technology and energy fuel while the world, even the major fossil fuel producing countries, have moved on to renewable energy.

The current energy fuel policy has turned the country’s power sector into the biggest threat to its economy and sovereignty. It’s time about the country aligned itself with the global trend of moving towards renewable energy for which country’s landscape is quite ideal.

Copyright Business Recorder, 2022

Farhat Ali

The writer is a former President, Overseas Investors Chamber of Commerce and Industry

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