
Let us examine some of the facts. The water and power minister is estimating that the project to build the Dasu Dam will cost around Rs735 billion, or about $6.9 billion. In other words, the installation cost of the hydroelectric power generation capacity at Dasu comes to about $1.5 million per megawatt, which is very cheap by both global and local standards. For the sake of comparison, a run-of-the-river dam set up by Hub Power Company in Punjab cost about $2.5 million a megawatt of installed capacity. Indeed, if anything, we believe the water and power ministry’s estimates are still too low.
We would remind Mr Iqbal of what his former professors at Wharton would no doubt have taught him about capital budgeting: the longer one waits to execute a project, the higher its cost. Pakistan desperately needs to reduce the weighted average cost of power generation and, by far, the best way to do that is to install more hydroelectric capacity. Of all the major projects under consideration, Dasu is the cheapest option.
In fairness to Mr Iqbal, the water and power ministry did itself no favours, first by using incorrect numbers for the exchange rate with the US dollar, and then by going directly to the Executive Committee of the National Economic Council rather than first sorting out the matter with the planning ministry. But Mr Iqbal should not throw the baby out with the bathwater. Yes, the power ministry made an error. But that error should be corrected, not compounded.
Published in The Express Tribune, February 15th, 2014.
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