4,320MW Dasu hydropower project hits snags

Published: June 24, 2010
Govt takes uneconomical decision of phasing out multi-billion-dollar project

Govt takes uneconomical decision of phasing out multi-billion-dollar project

ISLAMABAD: The plan to construct Dasu hydropower project in eight years has hit snags, as the government has in principle agreed to take a costly decision of completing the venture in phases – meaning it will now take 14 years to complete – under a condition slapped by the World Bank.

The World Bank informed the government that financing for the 4,320MW Dasu hydropower project would be conditional to constructing the run-of-the-river power project in phases. The Washington-based donor agency has indicated to provide $500 million loan for the completion of the first stage of the project, they added.

The decision would adversely affect the project cost and, more crucially, it would take six years longer to come to fruition. According to the original plan the project was to be completed in eight years and constructing it in phases would now take 14 years, they added.

The government’s reliance on thermal generation has contracted the hydel contribution in the total energy mix. The policy of generating more electricity through thermal power plants resulted in expensive generation that widened the gap between the cost of

production and sale – and the upshot is over Rs107 billion subsidies the government coughed up this year alone.

The original plan estimates the project cost at $6 billion. On top of that the government would pay about $1 billion on account of interest on loans obtained for the completion of the mega scheme.

“Phasing will be uneconomical and prove to be an unwise decision,” said Fazalullah Qureshi, an energy expert and former Secretary Planning Commission. He said that the major cost would be of transmission lines and civil works that cannot be phased out. Only units could be phased out but that too would be uneconomical, as that would render the infrastructure unutilized even after spending billions of dollars.

Dasu hydropower project is to be sited 7 km upstream of Dasu village on Indus River, 74 km downstream of Diamer Basha Dam and 350 km from Islamabad. The Project is located in district Kohistan of Khyber-Pakthunkhwa.

“The World Bank’s viewpoint is that by building the project in phases the government would be able to run it at the earliest and complete the remaining portions from the revenues generated by operating its completed units,” said Maqsood Sharif Qureshi, General Manager, hydro planning Wapda.

He said in that case the first unit would start generating electricity in five years instead of the planned eight years.

Qureshi said the government has decided to hire international consultants for technical input before taking a final decision to complete the project in phases.

In the second scenario, the government will have to spend millions to carry out another feasibility study. The one for the originally planned project was completed at a cost of Rs 561 million. The Wapda official said the government would carry out a second feasibility study and detailed engineering design, which would be completed in two years.

Published in The Express Tribune, June 24th, 2010.

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