Neelum-Jhelum project: Govt asked to reduce mark-up on loans it gives

WAPDA says costly loan may lead to higher power tariff

ISLAMABAD: The Water and Power Development Authority (Wapda) has asked Prime Minister Nawaz Sharif to reduce the mark-up on foreign loans that are passed along by the federal government for hydroelectric power projects at a much higher rate than the one charged by creditors.

“The request comes as the government is extending a foreign loan to Wapda for the 969-megawatt Neelum-Jhelum hydroelectric power project at a very high mark-up of 15% per annum,” a senior official of the Ministry of Water and Power said while talking to The Express Tribune.



The high mark-up will eventually burden the consumers with increased electricity tariff.

The federal government borrows money from foreign creditors at a lower mark-up, but the Economic Affairs Division transfers these loans to different entities including Wapda at an inflated rate of up to 15%, which is eventually collected from the consumers.

Wapda Chairman Muzammil Hussain took up the matter in a high-level meeting, chaired by the prime minister, on April 18. “These mark-up rates may be revised keeping in view the rates applicable to provinces,” he said.

Water and Power Minister Khawaja Muhammad Asif argued that any reduction in the mark-up would have a long-term impact on power tariff for the project.

Secretary to the prime minister told the meeting that re-lending of government-negotiated loans always came at higher rates according to the policy in vogue and the revision sought by Wapda would require policy change.

The prime minister directed that the matter should be taken up in the presence of Finance Minister Ishaq Dar.

The government’s plan to end electricity outages in 2018 has suffered a setback as work on two major hydroelectric power projects has dragged on.

In a meeting held in June 2015, the prime minister had been told that the Neelum-Jhelum power project would not come online in 2016 and work may be extended into 2017. Now, the premier has been apprised that work would only be completed in April 2018.

Owing to the delay, the government has got resignation of former Wapda chairman Zafar Mahmood. The new head has, however, given assurances to the government that work would be over as early as possible.

In the April 18 meeting, the Wapda chief spoke about progress on the Neelum-Jhelum and Tarbela 4th extension power projects.

He said first, second and third units of Neelum-Jhelum project would start operations by February 28, 2018, March 15, 2018 and April 15, 2018 respectively. After completion, the plant would produce 969MW and generate annual revenues of $460 million.

During the previous Pakistan Peoples Party-led government, the estimated cost of Neelum-Jhelum project had gone up to $2.74 billion from $1.8 billion and during the tenure of the current administration it further jumped to $4.21 billion.



In order to secure water supplies, Pakistan kicked off work on the Neelum-Jhelum River in Azad Jammu and Kashmir, but at the same time India started developing Kishanganga hydroelectric power project on the river, which sparked legal battle between the two countries in the International Court of Arbitration.

The Neelum-Jhelum project had earlier been slated for completion by October 2015, but the deadline was revised to November 2016 and now to April 15, 2018.

Published in The Express Tribune, April 29^th, 2017.

Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.