Neelum-Jhelum project to stay offline two more years

ISLAMABAD: Pakistan’s flagship 969-MW Neelum-Jhelum Hydropower Project in Muzaffarabad will remain offline for at least two more years due to a severe rock burst fault that happened last year, the National Electric Power Regulatory Authority (NEPRA) was told on Wednesday, extending an outage that has already drained hundreds of millions from the national exchequer and deprived consumers of low-cost electricity.

The project’s contract, awarded in July 2007, was completed in 10 years at a cost of Rs500 billion ($4.7 billion at the then exchange rate of Rs105.3 to the dollar) and commissioned in August 2018. It has been shut since May 2024 after a structural fault (rock burst) crippled its underground tunnel system and its absence from the Grid will continue for two more years. Its absence continues to push up generation costs and exacerbate the country’s circular debt crisis too. The project management had informed the government about this delay, an official said. The disclosure came during a NEPRA hearing on a petition by the Central Power Purchasing Agency (CPPA) seeking a Rs0.65 per unit reduction in June’s fuel cost adjustment – a cut that could save consumers about Rs8 billion if approved. CPPA cited cheaper fuel prices that brought generation costs down to Rs7.68 per unit compared to a reference cost of Rs8.33.

The hearing turned tense as private-sector representatives accused the government of failing to fully pass on a previously announced Rs1.71 per unit reduction linked to petroleum levies, with industrial tariffs spiking to Rs35 per unit. “The cost of doing business is unbearable,” one participant said.

NEPRA officials also faced questions over preferential gas supply to Jamshoro Power Plant and tariff increases for bagasse-based sugar mill projects. A NEPRA case officer defended the revised rates, saying they were adjusted to cover outstanding dues rather than special treatment. NEPRA chairman directed power distribution companies to present detailed statistics on loan defaults and the impact of circular debt during a quarterly adjustment hearing on August 4.