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January 8, 2017

Happy days for hydropower


January 8, 2017

For those partial towards hydro-power projects, there have been some happy tidings of late. May the good news soon translate into functioning projects. First, one of the two eleven-kilometre twin tunnels of the 969 MW Neelum-Jhelum was successfully excavated by tunnel boring machines. The early completion of the tunnels will save about a year and half in construction time resulting in a financial gain of about Rs70 billion to the country in early power generation. How I wish the project had started in 2002 by the Planning Commission, immediately after its approval, and not delayed till 2008.

Second, after many a squabble, the Kohistan district administration and Wapda resolved all land acquisition issues relating to the Dasu dam on River Indus. In the process, the locals would stand to benefit through a massive development package. How I wish even this delay was avoided.

Moreover, USAID, five years after it approved Wapda’s request, has contracted to finance the Keitu Weir portion of the Kurram Tangi dam in North Waziristan. This would provide irrigation water in the agency apart from generating electric power. How I wish these five years were not lost but thanks all the same.

It has been reported that Wapda with the support of the KP governor is very keen to build the Munda-Mohmand dam on River Swat in Fata. The construction of this project would be the biggest gift to the people of Peshawar valley and the tribal areas. The former would be freed from the annual curse of floods and the latter would benefit from the net hydel revenues of Rs4 billion. How I wish the Pakistani-origin but America-based private sector people had not wasted 13 years since 2003 when the project was with them. The annual loss to the country in power not generated was Rs19 billion apart from all other benefits denied. The nation demands an answer.

Furthermore, the prime minister has approved the financing arrangement for the construction of Pakistan’s most important project, the Diamer Bhasha dam. This project will, on completion, store 8.1 million acre feet of irrigation water, generate 18 billion energy units from an installed capacity of 4500 MW and save foreign exchange worth nearly $2.8 billion for the country in reduced oil imports.

Pakistan had been in negotiations with the Asian Development Bank (ADB) since 2008 for acting as the lead financer of the Diamer Bhasha Dam which then cost $8 billion. Earlier, the World Bank bowing to regional pressures, had refused to partner with Pakistan in developing the project despite its long association with the hydro power sector in the country. Sadly even the ADB later distanced itself from the multi-purpose project, the cost for which during this period of inaction rose to $14 billion. How one wishes the construction was initiated eight years ago by the government of the day instead of them banking on flimsy promises. The Chinese and European donors had shown a willingness to loan the money.

That was the past – we need to look towards the future. It has now been announced that the land acquisition and rehabilitation settlements costing nearly Rs116 billion will be contributed by the federal government through the PDSP in the budget. Most of this amount has been released and utilised for the intended purposes. The relocation costs of the KKH would be in addition to this. This augurs well for the Dam.

There are four other components of the Diamer Bhasha Dam. The civil works, including tunnels and two power house structures, will cost $3.5 billion, the electro-mechanical component (turbines and generators) and switchyard cost $3 billion, hydraulic gates and equipment cost $0.5 billion and the last component includes all other construction, financial, administrative and security costs.

According to press reports, the GOP, apart from providing the amounts for land acquisition and resettlement, will also raise the finances for the civil works through securitisation of Wapda power-generating assets to banks and construction contractors. This is a sensible and manageable approach and has worked well earlier. The Chinese contractors in the past had offered funding for this and other projects like the Munda-Mohmand dam. In all likelihood, since only the Chinese would bid for civil works, there is a need to approach the Asian Infrastructure and Investment Bank for the loan.

As for the electro-mechanical and transmission equipment, it should be ensured that only the best and most efficient equipment in the world is procured. This would mean western European, Japanese or North American options. Some equipment lately installed from other countries fared rather poorly in efficiency and durability. It turns out to be more expensive when the life-cycle costs are evaluated. In the Mangla power house for example, the forced outage of the Communist-era Czechoslovakian units was nearly five percent compared to 0.6 percent from the Japanese and Western units. Such mistakes need not be repeated. Even a one percent reduced efficiency for Diamer- Bhasha Dam would mean the loss of 45 MW continuously translated into an annual financial loss of nearly Rs300 million. Over 30 years, this totals Rs9 billion.

Twice, once in 2009 in Frankfurt and later in 2010 in Vienna, the top five electro-mechanical equipment manufacturers from Europe and America offered to provide financial assistance for Diamer-Bhasha. The manufacturers in the West have their factories sitting idle and they are prepared to offer competitive terms to Pakistan.

Finally, I wish to reiterate the obvious. When funding is available through the securitisation of Wapda’s assets and suppliers’ credit for all components of the project, the generating power houses must be built by Wapda. A one rupee surcharge per unit would recoup costs over time. The power houses should not be offered to private sector ownership from within the country or abroad.

Why gift nearly Rs25 billion or over $250 million annually as financial returns on power houses’ generation to private parties? This profit would be better spent on the people of Pakistan for infrastructural development and raising education and health indices. The federal government’s focus on hydro-power is spot on – how I wish KP had the vision to see beyond tiny micro-hydel power ‘toys’!

The writer has served as chief secretary of GB, AJK, KP and Sindh.

Email: [email protected]

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