LNG power plants: CDWP clears two projects at revised cost of Rs191b

Want of CCI consent can cause federation-provinces row

ISLAMABAD: The government on Monday cleared two LNG-fired power plants at a revised cost of Rs191 billion without seeking permission from the Council of Common Interests (CCI), which could trigger a row between the federation and the provinces.

The Central Development Working Party (CDWP) recommended for approval the 2,400MW projects to the country’s top economic decision-making body. The plant in Kasur district’s Balloki village would cost Rs93 billion and the one in Jhang district’s Haveli Bahadur Shah town would need Rs98.3 billion.



The CDWP also cleared the 16.4-billion-rupee project for transmitting electricity produced at the 1,320MW Hub coal power plant to the national grid station.

In March, the Executive Committee of the National Economic Council (ECNEC) had conditionally approved the two LNG projects with the order that the mega schemes’ budget should be brought down and the approval of the Inter-Provincial Coordination Committee (IPCC) should be sought.

Nine months down the line, however, the cost has gone up by Rs13 billion (or 7.3%); and the Ministry of Water & Power, the sponsoring agency, could not obtain the approval of the IPCC, a constitutional forum under the CCI that deals with matters of the federation and the provinces.

The energy wing of the Planning Commission had suggested to the CDWP that the LNG projects should only be approved after addressing the concerns regarding the IPCC decision and the rationale of the high cost.

These projects are funded from the Public Sector Development Programme, the main instrument for providing budgetary resources for development projects and programmes. For the current fiscal year, the government has earmarked Rs45 billion for carrying out the work. Both projects are essential for the government’s plan to end power cuts by December 2017.



The two plants will run at 57% efficiency. The alternative fuel for them will be high speed diesel (HSD). The National Electric Power Regulatory Authority has approved average tariff sale price of LNG-generated electricity at Rs8.07 per unit. At this rate, the projects will earn a profit of 20 paisas per unit.

The water & power ministry submitted the revised PC-I of the Haveli Bahadur Shah power plant at Rs98.3 billion, which is Rs8.2 billion (or 9.1%) higher than the previous budget. The Balloki plant’s revised cost is Rs93 billion, which is Rs5 billion (or 5.6%) higher than the ECNEC-approved price.

The energy wing has raised some objections on the revised estimates of the Ministry of Planning which were not duly addressed by the CDWP: the land cost was increased by 62% to Rs243 million, civil work cost enhanced by 94% to Rs12.4 billion, contingencies cost jumped by 102% to Rs5.3 billion and pre-operative expenses increased by almost one-fifth to Rs1.7 billion.

The contingencies are added at the rate of 9% of the total cost, despite the fact that the project is implemented in EPC (engineering, procurement and construction) mode. The Planning Commission objected over including Rs1.5 billion bonuses – a total of Rs3 billion for both schemes – for contractors in the cost of the projects. The body also raised questions over inclusion of Rs3.2 billion as unforeseen contingencies in the total cost of the schemes.

“The Ministry of Water and Power has not given any justification for the proposed increase in cost”, stated the commission. The ministry added additional cost of Rs21 billon, which was not included in the original PC-Is of both the schemes. It has, for the first time, included LNG Escrow cost of Rs5.9 billion for each project and seven-day HSD inventory of Rs3 billion.



The ministry has not provided the details of the bidders and the bidding process, and has claimed that the revised cost is based on the EPC contractors’ bids.

Published in The Express Tribune, December 22^nd, 2015.