Neelum Jhelum project: Saudi Arabia clears way for $100 million loan

Published: July 4, 2013
Escalating cost: Rs274.8b is the cost of Neelum Jhelum Hydropower Project, which has swelled 225%. PHOTO: FILE

Escalating cost: Rs274.8b is the cost of Neelum Jhelum Hydropower Project, which has swelled 225%. PHOTO: FILE


In less than a month since the coming to power of the Pakistan Muslim League-Nawaz (PML-N), which is considered close to the Saudi monarch, Riyadh has cleared a $100 million loan for swiftly completing work on the 969-megawatt Neelum Jhelum Hydropower Project.

According to sources, a high-level Pakistani delegation will leave for Saudi Arabia on July 7 to strike the loan deal with the Saudi Fund for Development. Like China and Abu Dhabi, Saudi Arabia had withheld the loan during the tenure of the previous government.

“We are also engaged in talks with the Abu Dhabi Fund to persuade it to release the $100 million loan, which was stopped until the settlement of a payment row between UAE’s Etisalat and the Pakistan government over privatisation of Pakistan Telecommunication Company Limited,” an official said.

China also withheld $448 million for the Neelum Jhelum project during the rule of Pakistan Peoples Party-led coalition government and only cleared the assistance after the PML-N govt took over.

The PPP government had encountered a host of problems in generating funds for Neelum Jhelum hydropower project and the delay caused a sharp increase in the project cost, which jumped 225% to Rs274.8 billion against earlier estimates of Rs84.5 billion.

“The prime minister has asked the Ministry of Water and Power to probe the delay, which did not only send the cost soaring, but also sparked the worst energy crisis in the country,” the official said.

The Planning Commission’s energy wing has also questioned the project’s execution programme. It pointed out that though the project won approval on December 12, 1989 at a cost of Rs15.23 billion, the cost was revised upwards to Rs84.5 billion on February 28, 2002.

The energy wing also noted that the project was awarded to a Chinese firm without a firm commitment of financial assistance from the donors.

Neelum Jhelum will be an expensive hydropower project as it will generate electricity at a higher cost of over Rs10 per unit compared to average cost of 16 paisa per unit for hydroelectric power.

Consumers are bearing the cost of delay and inefficiency and are paying a surcharge of 10 paisa per unit in their electricity bills. Under this head, the government collects Rs6 billion a year to finance the project.

Neelum Jhelum is a strategic project launched by the government to secure water rights over Neelum River, where India is also constructing Kishanganga Dam. Pakistan and India are locked in a legal battle in the International Court of Arbitration and a final decision is expected by the end of current year.

Published in The Express Tribune, July 4th, 2013.

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Reader Comments (12)

  • Jul 4, 2013 - 2:12AM

    Pakistan get $100,000,000 loan from overloads, Saudi Arabia, meanwhile put Iran gas pipeline on hold. One is independence, other is a LOAN.

    We are always going to be shackled. IMF, Saudi Arabia etc.

    What about all that money Iran has dumped into the pipeline? Do we have no shame or self-respect?


  • The Khan-Waterloo,Ontario
    Jul 4, 2013 - 2:30AM

    Thank YOU KSA.


  • kanwal
    Jul 4, 2013 - 3:23AM

    So we are being offered another loan which will go in the pockets of we know who. This is at the cost of Iran Pakistan gas pipe line.


  • Thetruth
    Jul 4, 2013 - 4:50AM

    What the iranians did is far more impressive. And they have the depth to work with pakistan in so many other areas. Not to mention they’re our neighbors.


  • lawrenceofthalebia
    Jul 4, 2013 - 8:20AM

    we must say bye bye to abu dhabi because of their absurd conditions for loans. they didnt go ahead with khalifa refinery at gawadar due to some disagreement at PARCO where they only have 36% share and now china is expected to build one there. they use abu dhabi fund for development as a tool to safeguard their investment which might be right in the business sense but then they shudnt behave as our master


  • Muhammad Bilal Aslam
    Jul 4, 2013 - 9:00AM

    People who are crying about the loss of Pak-Iran gas pipeline should go and study the agreement which PPP government did with Iran. The gas price in agreement is locked with oil price for next 25 years. On the other hand, gas prices are set to go down worldwide thanks to a revolution in shale gas. We will be crying in the future over gas prices just like we are repenting the IPPs using furnace oil to generate power.


  • Usman786
    Jul 4, 2013 - 10:01AM

    WHY WE ARE TAKING LOAN WHEN THE DELAY WILL CAUSE INDIA TO divert water thanks to WAPDA and Ministry. Donot build Kalabagh and let people of Thar suffer


  • Jul 4, 2013 - 5:23PM

    100 million USD means Rs. 9.8 billion ( Loan from KSA) . 448 USD means Rs. 43.9 billion The project cost is Rs. 274.8 billion . Where from the remaining fund( roughly 80% of the project cost) will come is not explained. . In absence of total fund planning and its availability within the time frame, the project will get further delayed with cost escalation. There will always be a reservation if the project will really be completed.
    ET correspondent has not cared to give reasons as to why the hydro power cost will be Rs. 10 per unit. This is a poor reporting coupled with lack of common sense on his part..


  • Bhai Log
    Jul 4, 2013 - 6:51PM

    More sectarian violence on the way


  • Ahmed
    Jul 4, 2013 - 7:26PM

    I agree with Muhammad bin Aslam. Iran gas is not free. In addition to the price locked in for 25 years, the price charged is approx 25-30% higher than international market price today. Secnondly, its not a free delivery. Pakistan will have to lay the pipeline & other infrastructure from the Iranian border to the national grid for gas to flow in. This will require massive funding which we don’t have. So net net, you need funding + expensive cost of gas for next 25 years while in building dam, it is just the funding portion which is now being provided by SA/China etc. and the electricity produced will practically be the cheapist. So do your math and then decide.


  • Pakistan different
    Jul 4, 2013 - 7:38PM


    We all know being an immediate neighbor is not a net positive when it comes to Pakistan.


  • Polpot
    Jul 4, 2013 - 9:38PM

    In view of the multiple headaches associated with this project
    it should hencforth be called: 969-megawatt Neelum Jhamela Hydropower Project.


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