Visit to Kishanganga Dam site: India has stopped work following court’s orders

Chinese firms threaten to abandon Neelum Jhelum project over delay in clearance of dues.

ISLAMABAD:

Much to the satisfaction of Pakistan, Delhi has told Islamabad during a recent visit to the site of Kishanganga Dam, which was being built on Neelum Jhelum River, it has stopped work on the project and will not violate the stay order granted by the International Court of Arbitration, say officials.

However, Pakistan faces a threat back home as a Chinese joint venture has warned that it will abandon the strategic 969-megawatt Neelum Jhelum hydropower project, located in Azad Jammu and Kashmir, because of delay in clearance of its dues.

During a visit of the Pakistan-India joint inspection commission to the site of Kishanganga Dam, Pakistani officials noted that no construction work was under way following the stay order from the international court, approached by Pakistan.

“India is not even working on those parts of the dam, where work has not been restricted by the court,” a senior government official said.

The government claims that India will win water rights over Neelum Jhelum River if it builds Kishanganga Dam before completion of the Neelum Jhelum power project. This will lead to Pakistan losing 13% of the river’s water, it says.

However, officials in knowledge of the developments insist that Pakistan enjoys water rights over the river under the Indus Waters Treaty and India cannot lay claim to it by building the dam.

Today’s deadline

The joint venture of China Gezhouba Group of Companies and China Machinery Engineering Company, which is working on the Neelum Jhelum power project, has set a deadline of October 20 for the government to clear its dues amounting to Rs8.5 billion, says an official. In case of failure, the companies will back out of the project, leaving the government in a critical situation.

According to sources, the government is finding it difficult to arrange funds for the project as the Chinese government has linked the release of a loan of $448 million with the award of Islamabad Safe City project to a Chinese company.

“We will talk about the loan if Pakistan awards the contract of Islamabad Safe City to a Chinese firm,” an official said, quoting Chinese authorities.

However, in August this year, the Supreme Court of Pakistan cancelled the Rs14 billion Safe City project in the capital due to allegations of corruption.

The Abu Dhabi government’s leading national entity, the Abu Dhabi Fund, has also withheld a promised loan of $100 million for the Neelum Jhelum project until the settlement of a payment dispute between Pakistan and Etisalat pertaining to privatisation of Pakistan Telecommunication Company Limited (PTCL).

Rs2b a month

“The Ministry of Water and Power has requested the finance ministry to provide Rs2 billion every month for the Neelum Jhelum project, but no response has been received,” an official of the Ministry of Water and Power said.

The contract for the project, which has already been delayed, was awarded to the Chinese joint venture during the Musharraf regime without firm financing commitments, the Planning Commission observes.

Owing to the delay, the cost of the project has gone up from Rs84.5 billion to Rs274.8 billion, which will push up power generation cost to over Rs10 per unit compared to existing cost of 16 paisa per unit for hydropower.

The burden of delay and inefficiency is falling on the consumers as the government has decided to arrange 40% of funds for the project through a levy on energy. At present, the consumers are paying a surcharge of 10 paisa per unit, which amounts to Rs6 billion per year.

Published in The Express Tribune, October 20^th, 2012.