World Bank approves $1.1b for agro projects in Pakistan

$840 million Tarbela IV Extension Hydropower Project will add power generation capacity of 1,410 megawatts.

ISLAMABAD: The World Bank on Tuesday approved $1.1 billion loans for expansion of Tarbela dam to add another  1,410 megawatts of electricity into the grid and maximising benefits in the agriculture sector by introducing modern irrigation techniques.

The Executive Board of the Washington-based lending agency approved two projects totaling $1.09 billion aimed at supporting Pakistan’s growth agenda for reducing poverty, said the World Bank country office in an announcement on Wednesday.

The Tarbela IV Extension Hydropower Project will add power generation capacity of 1,410 megawatts, and the Punjab Irrigated Agriculture Productivity Improvement Project is geared toward maximizing water use efficiency for increased yield per unit of water, it added.

The availability of electricity is of crucial importance for the economic growth and development of Pakistan. Widespread loadshedding is disrupting the lives of Pakistanis and the economic impact of energy shortages is estimated at upward of 2 per cent of Gross Domestic Product, said the World Bank.

By developing its vast hydropower potential – of which only 15% has been developed so far – Pakistan can significantly reverse the situation and reduce the cost of energy supply mix, the statement added.

The $840 million Tarbela IV Extension Hydropower Project will use the existing dam, tunnel, roads and transmission line for generating additional electricity in summer months when demand for electricity and river flows are high.

“The Tarbela IV Hydropower Project will enhance Pakistan’s energy security by adding low-carbon, least-cost and renewable hydel power to its energy portfolio,” said World Bank Country Director for Pakistan Rachid Benmessaoud.

“The beauty of this project is that it will help Pakistan reduce the gap between supply and demand of electricity by maximizing the benefits of the existing infrastructure of Tarbela Dam without requiring any land acquisition or relocation of population,” siad Rachid. He added that the direct beneficiaries will be millions of energy users, including industries, households and farmers who would get more electricity at a lower cost and suffer fewer blackouts.

The challenges in the water sector are equally daunting. Pakistan’s water availability is shrinking while the demand is increasing. Vast amount of water is lost due to deteriorating watercourses and wasteful on-farm water use. Improved water use efficiency and new technology that promotes crop diversification will be critical going forward.

The $250 million Punjab Irrigated Agriculture Productivity Improvement Programme Project is aimed at getting maximum productivity out of each drop of the irrigation water by weaning farmers away from the traditional and wasteful flood irrigation to modern methods like drip and sprinkler irrigation systems, which in turn will encourage crop diversification.

“High efficiency systems to be installed in over 1,20,000 acres of irrigated lands in Punjab would promote water conservation and increase crop yields,” said World Bank’s Lead Water Specialist Masood Ahmad.

This would have a demonstrative effect and the local industry would develop after the installation of such systems as it happened in the case of ground water development over the last three decades after groundwater wells were installed by the government for controlling water logging and salinity.

Tarbela IV Extension Hydropower Project includes $400 million loan from the International Bank of Reconstruction and Development (IBRD), which is comparatively an expensive window.

The $400 million loan has a 21-year maturity period, including a grace period of 6 years. The remaining $440 million of Tarbela Project and US $250 million for Punjab Irrigated Agriculture Productivity Improvement Project are credits from the International Development Association (IDA), the World Bank’s concessionary lending arm.

These carry a 0.75% service charge, and 1.25% interest rate, a five-year grace period and a maturity of 25 years.