ECNEC approves Diamer Basha project at Rs1.2 trillion

Cost saw an increase of Rs302 billion against original price due to rupee devaluation

Shahbaz Rana April 07, 2023
design: Ibrahim Yahya


The government on Thursday approved the Diamer Basha power generation project at a cost of over Rs1.2 trillion, showing an increase of Rs302 billion against the original price mainly due to rupee devaluation.

The Executive Committee of the National Economic Council (ECNEC), which approved the 4,500MW power generation project, considered a total of 10 summaries. Majority of those came before the forum due to years of mismanagement, which required further cost escalation.

Headed by Finance Minister Ishaq Dar, the ECNEC approved eight projects worth Rs1.4 trillion – a cost that was nearly Rs376 billion or 27% higher than the original estimates of these schemes.

The ECNEC approved the project at Rs1.24 trillion against the original estimates of Rs933.6 billion, with a noticeable increase of one-third or Rs302 billion of the project cost within a few years. The ECNEC had also discussed the initial cost last year.

Earlier, the Water Resources Ministry submitted PC-I for power generation facilities at a total cost of Rs933.6 billion, including a foreign loan of Rs409 billion. The foreign loan component has now been increased to Rs598 billion. But the cost of the project was updated on the average floating exchange rate of January 2023, Rs234.13 to a dollar. WAPDA will be implementing the project by making the timely arrangement of financing for the power generation part of the project.

The main objective of the project is to generate 4,500MWs hydropower as part of the Diamer Basha Dam project. The dam component of the project is already under implementation.

The Cabinet Committee on Energy had split the construction into two phases; the dam and power generation facilities. The ECNEC approved the dam in 2018. The National Transmission & Despatch Company (NTDC) will ensure that construction of the power evacuation infrastructure is synchronised with the commissioning date of the project and will explore financing from foreign lenders, prior to submission of PC-I for power evacuation arrangement.

The projects are being approved at a time when there is scarcity of resources and the government is drastically reducing development spending, except on schemes recommended by parliamentarians.

The ECNEC deferred the proposal of delegating executive powers to electricity distribution companies for the approval of schemes in the electoral constituencies after the bureaucracy did not back the move.

The steering committee of the Sustainable Development Goals (SDG) Achievement Programme – an acronym used to fund schemes recommended by members of parliament – had proposed that in order to expedite the approval of electrification schemes, the Power Division may delegate its authority to approve such schemes to the board of directors of the distribution companies.

However, the existing rules do not allow for such delegation, especially for projects funded via the Public Sector Development Programme (PSDP). The government had already tried and failed at getting approval from the Central Development Working Party (CDWP) and the ECNEC, causing a huge wastage of funds.

In the meeting, a question was raised about a mechanism to stop the duplication of such electricity projects. Due to lack of consensus on a proposal to authorise the power secretary to ensure that there is no duplication, the matter was deferred.

A finance ministry handout stated that the ECNEC, after discussion, allowed for the continuity of the prevailing mechanisms and allowed the Power Division to approve SDG schemes.

The ECNEC also approved a summary submitted by the Planning Commission on procedures to clear pending liabilities of closed projects. The PSDP projects are launched with the approval of competent fora and are supposed to be closed after clearing of all project liabilities – however, in certain cases, projects are closed without clearing liabilities. In such cases, sponsoring agencies regularly approach the Planning Commission for allocation of resources to clear the pending liabilities.

It was decided that the liabilities should be audited by the external auditor i.e., auditor general office or through internal auditors. For payment of pending liabilities, relevant projects may be revised with the approval of departmental working parties and the requisite funds may be allocated via technical supplementary grants to clear audited pending liabilities.

Sialkot Motorway

The meeting also deferred the approval of a link road to connect Narowal with Lahore – the Sialkot Motorway. The CDWP approved the project in principle and recommended it to the ECNEC at the cost of Rs36.8 billion on equal cost sharing basis between the centre and Punjab. However, the Punjab government did not support the project on Thursday. The original cost of the link road project was Rs14.2 billion, which has already been increased by 160%.

The ECC approved the Gomal Zam project at the revised cost of Rs26.6 billion – 103% higher than its initial cost. Initially, the project had been approved in the year 2001 at a cost of Rs12.8 billion.

In addition, the ECNEC approved the Digital Economy Enhancement Project (DEEP) at the revised cost of Rs17.5 billion funded by the World Bank, “Land Acquisition, Affected Properties, and Compensation for Rajanpur – Dera Ghazi Khan Section as four-lane highway and Dualisation and Rehabilitation of Dera Ghazi Khan – Dera Ismail Khan Section of N- 55” project at a rationalised cost of Rs11.4 billion and reconstruction of the Turbat-Mand Road from Motorway (M-8) to Iranian Border (Radeeq) project at a cost of Rs19.6 billion, 87% higher than the cost approved initially.

Besides, the economic body also okayed the construction of the Panjgur-Gichak-Awaran road at a cost 88% higher than the original price and the Shagharthand project at 441% higher costs.

Published in The Express Tribune, April 7th, 2023.

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