Money Matters

Building for survival

Money Matters
By Hussain Ahmad Siddiqui
Mon, 09, 18

The Diamer Basha Dam project is not likely to take-off in the near future, it seems, given the size of the project and financial and technical challenges it poses.

The Diamer Basha Dam project is not likely to take-off in the near future, it seems, given the size of the project and financial and technical challenges it poses.

There has been poor response, if any, to Water and Power Development Authority’s (WAPDA) “Invitation for Prequalification” to the prospective international contractors for the construction of main dam and appurtenant structures advertised in the national press on April 4, 2018.

Last date for receiving the prequalification documents for the first major works, to be known as Contract ICB No DBDP (MW-1), was June 19, which was subsequently extended initially to August 15 and now to September 12. Pursuant to the recent directive of the Supreme Court of Pakistan to develop the project on war-footing basis WAPDA has demonstrated priority for the project by issuing this advertisement afresh on July 2 in the international newspapers (“The Wall Street Journal’’).

The bidding for the much-delayed roller-compacted concrete dam shall be invited only from the prequalified contractors through International Competitive Bidding (ICB) process. It is expected that the invitation for competitive bids will be done in November 2018, according to the prequalification notice. The Executive Committee of the National Economic Council (ECNEC) in its meeting held in April this year had approved the Diamer Basha Dam project (only dam component) at a total rationalised cost of Rs474 billion (about $4 billion). Other different lots of the works are (i) underground powerhouse works and related structure, (ii) hydro-mechanical equipment and steel structural equipment, (iii) power plant generation equipment, and (iv) electrical high-voltage equipment and power plant electrical equipment. Prequalification of international contractors for all the lots had remained suspended by WAPDA since long, though WAPDA has met almost all technical requirements to begin with the work including preconstruction activities.

The mega project, which was announced by the government in January 2006 at total cost $8.5 billion, has since then witnessed unprecedented delays in its commencement for a variety of factors. It is now estimated to cost $14 billion, which is expected to further increase on its completion that is scheduled within eleven years. Termed as one of the largest and most costly dam in the world planned today, the project has faced several setbacks. Major international donors, including the World Bank and the Asian Development Bank (ADB) refused in the past to finance the project, as the international project finance convention had reservations due to the disputed status of the territory. The recent efforts of the government to include it in the CPEC projects did not materialise either.

The multipurpose project is now to be financed by Pakistan through its own resources for which a Fund (Diamer Basha and Mohmand Dams Fund) has been established by the Supreme Court that has already attracted contributions from the public to the tune of Rs1.58 billion. Also, WAPDA plans to issue additional bonds for raising the funds from the market, besides levying surcharge on the electricity consumers as in case of the construction of Neelum-Jhelum Hydroelectric Power project.

Given the conditions of poor response from civil contractors of various international sources to WAPDA’s invitation for prequalification for the construction of the main dam, it is likely that to avoid further delay in developing the mega project, a Chinese company or joint venture might be awarded the contract for dam construction on negotiations basis.

Such a decision however will compromise on the timely completion, also resulting in cost overruns of Diamer Basha Dam as evidenced in case of the Neelum-Jhelum hydropower project. To attract the western sources to participate in the bidding process, WAPDA has to consider out-of-box solutions. When the western contractors constructed the controversial Kishanganga Dam in India, why should they be reluctant to participate in the construction of Diamer Basha project? The main issue is the non-availability of sufficient and timely funds, in particular the huge foreign exchange required. For the purpose, the government needs to renew earlier positive indications from the Islamic Development Bank (IDB) and friendly and Islamic countries, such as Kuwait, to partially finance the project.

There are many engineering challenges for the project to be located in a mountainous, high seismic risk area. The two underground powerhouses, on each riverbank, will be built. Each power house will have six generating units of 375 megawatt each, Francis type turbines, with a total capacity of 2,250MW, aggregating to 4,500MW power generation capacity. Laying the double-circuit 550kV transmission lines to disperse power from the proposed powerhouse to the national grid at Tarbela at an additional cost, will also pose a serious challenge.

Likewise, the resettlement of the population to be displaced and mitigation of environmental and social impacts has not been included in the project cost. The 200-square-kilometer reservoir would flood 100km of the Karakoram Highways, and the villages and farms of over 35,000 people would submerge. The project would cover an area of over 200 square kilometers, according to the design.

According to an International Monetary Fund (IMF) report, Pakistan ranks third in the world among countries facing acute water shortage. Reports by the United Nations Development Program (UNDP) and the Pakistan Council of Research in Water Resources (PCRWR) conclude that Pakistan could reach absolute water scarcity by 2025, with less than 500-cubic meter available per person, if corrective measures were not adopted on emergent basis.

Dams and reservoirs are essential tools in harnessing precious water resources to improving water security, providing irrigation for food production, mitigating the challenges of climate change, and developing hydropower schemes to increase supplies of clean and reliable energy that can be delivered at times of peak demand.

Thus, construction of Diamer Basha Dam will meet national aspirations for addressing the major issues of food security and shortage of electricity. The mega dam is expected to provide 6.4 million acres feet (MAF) live storage capacity, and adding substantial power generation capacity of low-cost and clean energy to the national grid.

After completion, the project is projected to increase national water storage capacity of Pakistan from 38 days to 45 days, and will also enhance life-span on downstream reservoirs including Tarbela Dam by blocking the sediments upstream the Indus River.

According to international experts, Tarbela, Mangla and Chashma reservoirs have lost about five million acre feet (MAF) cumulative water capacity, which may further reach to total six MAF shortly, almost equal to original combined capacity of Mangla and Chashma reservoirs.

Professor Sherman Robinson, a leading expert at the International Food Policy Research Institute (IFPRI) had worked out in 2014 the potential impact of the construction of Diamer Basha Dam on the economy of Pakistan through the modelling framework, which is published under the title “Economic evaluation of the Diamer-Basha dam: Analysis with an integrated economic/water simulation model of Pakistan”. The researcher has analysed the impact of changes in water courses in the Indus River basin, focusing on agriculture and hydropower benefits provided by the project under different climate scenarios.

The results of scenario analysis indicate that the Diamer-Basha Dam would improve the resilience of Pakistan to adapt to climate shocks, providing increased hydropower capacity and enhanced ability to manage the water system to offset climate-induced variation in river flows.

In conclusion, the paper says, Diamer Basha is a feasible project, critical for Pakistan, and its actual benefits far exceed the original estimates of the policymakers.

The writer is the retired chairman of the State Engineering Corporation