The cost overrun

Nandipur Power Project: In 2008, the Pakistan Electric Power Company (PEPCO) signed a Rs23 billion contract with Dong Fang Electric Corporation of China to build the 525MW power project. Lo and behold, our government has already spent Rs84 billion on the project. In 2014, representatives of the National Transmission and Dispatch Company (NTDC) revealed that the Nandipur Power Project ‘generated electricity at the record cost of Rs42 per unit and was shut down after only five days of operation.’

A cost overrun ‘involves unexpected costs incurred in excess of the budgeted amounts’. A ‘Bill of Quantities’ is a ‘detailed statement of work, prices, dimensions and other details, for the construction of a project.’

In 2008, the Nandipur Power Project’s ‘Bill of Quantities’ stood at Rs23 billion. Why did the government end up spending a wholesome Rs84 billion? Why did the government end up spending a whopping 3.65 times the original ‘Bill of Quantities’? The initial plan was to produce 525MW by spending Rs23 billion. Is the plant economically feasible at Rs84 billion?

What went wrong? Did the price of the plant and equipment go up 3.65 times? Did the price of civil works go up 3.65 times? Did the price of steel go up 3.65 times? Is it incompetence? Is it corruption? Or is it mismanagement?

Neelum-Jhelum Hydropower Plant: The construction of the plant was first approved in 1989 at a cost of Rs18 billion. The plan was later improved by increasing the tunnel length and the generation capacity. The new cost of PC-1 was estimated at Rs84 billion. On July 3 2014, the executive committee of the National Economic Council (ECNEC) revised the PC-1 cost from Rs84 billion to Rs274 billion. Lo and behold, our government has already spent Rs550 billion on the plant.

In 2002, the Neelum-Jhelum Hydropower Plant’s ‘Bill of Quantities’ stood at Rs84 billion. Why did the government end up spending a wholesome Rs550 billion? Why did the government end up spending a whopping 6.5 times the original ‘Bill of Quantities’? The original plan was to produce 969MW by spending Rs84 billion. Is the plant economically feasible at Rs550 billion? Can Neelum-Jhelum even produce 969MW after the Kishanganga Hydroelectric Plant?

What went wrong? Did the price of the plant and equipment go up 6.5 times? Did the price of civil works go up 6.5 times? Did the price of steel go up 6.5 times? Is it incompetence? Is it corruption? Or is it mismanagement?

New Islamabad International Airport: The construction of a new airport in Islamabad was first approved at a cost of Rs37 billion. Lo and behold, our government has already spent Rs100 billion on the project.

What went wrong? Did the price of civil works go up by 2.7 times? Did the price of utility works go up by 2.7 times? Did the price of building works go up by 2.7 times? Did the price of air navigation facilities go up by 2.7 times? Did the price of aeronautical ground lighting go up by 2.7 times? Did the price of water supply system go up by 2.7 times? Did the price of power supply system go up by 2.7 times? Did the price of sewage treatment system go up by 2.7 times?

The accumulated so-called ‘cost overrun’ for these three projects stands at a colossal Rs600 billion, and this cost overrun amounts to Rs20,000 for each and every Pakistani family. Just imagine: we allocate Rs920 billion for the defence budget and the cost overrun for just three mega projects is 65 percent of the defence budget.

The writer is a columnist based in Islamabad.

Email: farrukh15@hotmail.com Twitter: @saleemfarrukh