The government on Saturday gave its final go-ahead to four mega projects, including two road construction schemes under the China-Pakistan Economic Corridor (CPEC) at a revised cost of Rs862 billion - Rs214 billion or one-third higher than original estimates.
The Executive Committee of National Economic Council (Ecnec) approved the 969-megawatt Neelum Jhelum Hydropower project as well as CPEC’s 118-kilometre long Havelian-Thakot and 392-km Sukkur-Multan section roads. It also approved the National Highway N-70 East-West Road Improvement Project.
Neelum Jhelum project: ‘Hasty project launch caused huge losses’
The main reason behind the increase in cost of these projects except Neelum Jhelum was the government’s compulsion to take foreign loans, which were tied with giving engineering, procurement and construction contracts, to parties belonging to these countries. The contractors placed bids higher than the original ones, leaving no option for the government but to revise the cost.
The CPEC road projects are funded by China while N-70 project is funded by Japan. The Ecnec had already approved these projects during the last couple of years, but the increase in prices required a revalidation.
In addition to these projects, the Ecnec also approved the Fulbright Scholarship Support Programme at a cost of Rs12.6 billion with 79% of the cost being borne by the US government. Finance Minister Ishaq Dar chaired the meeting.
Neelum Jhelum: CDWP clears power project at cost of Rs410 billion
The major revision came in the price of 969MW Neelum Jhelum hydroelectric power project that it approved at a revised cost of Rs404 billion - up from July 2013’s estimates of Rs274.8 billion. While sanctioning the project, the Ecnec directed the Water and Development Authority (Wapda) to take disciplinary action against officials responsible for negligence and lax management.
Ecnec also directed Wapda to improve its corporate governance and hire qualified chartered accountants as chief finance officers for mega projects, said Ahsan Iqbal, Federal Minister for Planning and Development while talking to The Express Tribune.
The Neelum Jhelum project was originally approved at a cost of Rs15.3 billion. The last revision came in 2013 when the Ecnec approved the cost at Rs274.9 billion. The project will be completed at an exorbitant price of $4.23 million per megawatt - the highest price for any hydroelectric power project, according to project documents. At this price, the Neelum Jhelum project’s generation cost per unit will be Rs11.17.
Govt green-lights three CPEC projects at 23% higher cost
The Ecnec approved the 392-kilometre Multan-Sukkur section of the Lahore-Karachi Motorway at a price of Rs298 billion, which is Rs39 billion more than the cost at which Ecnec approved this project in July last year.
The Ecnec approved the 118-km Havelian-Thakot road project at a price of Rs141.9 billion. In December last year, the Ecnec approved this scheme at Rs95.4 billion. Within a year, the project cost jumped by almost 50%.
Iqbal said that the initial cost of Rs95.4 billion was based on engineering estimates and the revised cost is worked out by Chinese contractors on the basis of technical evaluations. He said the increase in cost would ensure high safety standards against seismic activities in this region.
Both the CPEC road construction projects have been awarded to Chinese contractors under Pak-China framework agreement. “Although the revised cost is higher than original estimates, it is still Rs170 billion less than the price quoted by the lowest Chinese bidders,” said Iqbal.
CPEC stimulates investment from other countries
He said the Planning Commission has ensured Rs170 billion savings by seeking clarifications from the Chinese bidders on cost components mentioned in their bid documents.
He ruled out that any individual could influence the cost, as the projects are being executed by Chinese contractors.
Both these projects are vital for linking western China with the Gwadar port and fall on the eastern alignment of the corridor.
The Ecnec also approved East West Road Improvement Project, which will link Balochistan’s hinterlands with main road arteries, at an upward revised cost of Rs23 billion - up from earlier approved price of Rs18.5 billion.
Published in The Express Tribune, December 20th, 2015.
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