Foreign companies to take over Diamer Bhasha dam

Provinces arrive at consensus on new hydel policy, but demand return of projects after lease expiry

ISLAMABAD: All provinces have agreed on a draft of the new hydroelectric power policy that calls for handing over mega projects of 24,200-megawatt capacity including the gigantic Diamer Bhasha dam to foreign companies, mainly Chinese firms, for their swift implementation.

The consensus was reached after multilateral donors gave a poor response to requests for financing the power projects.



The provinces, however, demanded that the projects should be returned to them after the expiry of lease contract.

As part of the policy, private investors will be offered exemption from duties and taxes during construction phase of a project as well as income tax holiday for the first five years of operation.

However, major stakeholders in the hydroelectric power projects including Azad Jammu and Kashmir (AJK), Gilgit-Baltistan (G-B) and Federally Administered Tribal Areas (Fata) have sought an increase in power tariff, like that allowed to Khyber-Pakhtunkhwa, in the new policy. This will increase their share in the net hydel profit.

Briefing the media, Water and Power Development Authority (Wapda) Chairman Zafar Mahmood said a high-level meeting was held on Tuesday with all provinces and regions like AJK, G-B and Fata for giving a presentation on the new hydroelectric power policy.

He revealed that the provinces demanded the transfer of projects after the expiry of 30-year lease whereas AJK, G-B and Fata wanted an increase in their share of net hydel profit with a tariff hike.



“I personally believe that their share in hydel profit should be increased,” he said, but expressed fear that a denial could spark negative perceptions among them.

A summary has been sent to the Ministry of Water and Power for seeking approval of the Economic Coordination Committee in this regard.

Responding to a question, Mahmood said the new policy would be tabled before the Council of Common Interests for approval as all provinces had agreed on its draft. “Chinese companies are interested in executing the power projects,” he said.

However, the National Electric Power Regulatory Authority (Nepra) and the Central Power Purchasing Agency have pointed out that the projects could not be transferred to the provinces legally.

About Pakistan’s inability to raise funds, Mahmood said feasibility studies and detailed engineering designs required significant financing without return and international financiers were also conscious about the displacement of people and the environmental impact.

Donor sensitivity regarding dislocation of people, loss of employment, heritage, way of life and a negative impact on environment hampers financing for the projects.

“In some cases, the private investors succeeded in getting the indicative tariff approved, but failed to acquire financing for the project due to land acquisition and resettlement issues.”

This lengthy process has resulted in inordinate delay in the implementation of projects.

Under the new policy, the government will give two options to the private sector. In the first option, a project for which the detailed engineering design has been completed by consulting firms, the government will invite investors to execute the scheme according to the design already approved.



Preference will be given on the basis of early completion and Nepra will announce an upfront tariff.

Before offering the project to the private investors, Wapda will undertake a host of measures such as upgrading the feasibility study and engineering design, environmental impact assessment, land acquisition and resettlement, construction of access roads and bridges, power transmission plan, power purchase agreement, feasibility stage tariff determination and engaging international experts for the selection of bidders.

In the second option, bidders will be ranked on the basis of their ability to complete work early and the successful bidder will provide a performance bank guarantee for the project. The investor will develop his own design and preference will be given on the basis of early completion and maximum output.

Mahmood said the World Bank was funding the Dasu hydropower project that had unlocked financing for such schemes. Wapda has secured Rs100 billion for the Neelum Jhelum hydropower project and Rs140 billion for the Dasu project. “Financial close of the Neelum Jhelum project will be achieved this month,” he added.

Published in The Express Tribune, May 11^th, 2016.

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