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The fate of Ghazi arotha project

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From Shamim Ahmed Rizvi, Islamabad
Feb 14 - 20, 2000

Ghazi Barotha hydro power project which was suffered because of many lapses in the pest mainly on the part of WAPDA is likely to be delayed further by another 18 to 24 months as WAPDA has not so far been able to arrange its share in the cost as the matching rupee component which is a precondition for release of funds from foreign donors. The commissioning of the project which was seheduled in June 2002 cannot take place before June 2004 even if WAPDA pays Rs. 15 billion as its share in the next 2/3 months.

Lack of preparedness on the part of WAPDA and non completion of basic requirement such as acquisition of land, payment of compensation and resettlement programme of affectees even in the initial stages caused lot of resentment among the donor agencies such as World Bank, Asian Development Bank, Islamic Development Bank and Japan. It was after repeated protests, reprimands and even threats of termination of agreement that WAPDA completed preliminaries and actual work started on the project after loss of over one year. The reports indicating apprehension of delay of another 2 years in the completion of the project is most deplorable. The major and rather the only hurdle was stated to be the serious resource crunch faced by Wapda which was not able to maintain a regular flow of investment in the construction of this project which would have a capacity to generate 1,450 megawatt of power. The resource gap estimated at Rs. 15 billion constitutes Wapda's share in the project, the foreign currency loan assistance from the World Bank, Asian Development Bank and the government of Japan is available. However, since the matching rupee funds have not been forthcoming from Wapda according to the timeframe of construction work, the inevitability of delay in the completion of the overall project appears to be difficult to overcome unless the government takes some initiatives to deal with the crisis.

Ghazi Barotha dam is crucial to the country's programme to speedily improve the power supply. The delay in the construction of the proposed dam would further postpone the accomplishment of several development plans. Moreover, hydel power generation is much cheaper than thermal power. The power generation from this project would thus be most economical for the country. In this context, any further loss of time in the development of the country's hydropower potential cannot but be seen as a setback in the vital energy sector.

The total cost of the project has been estimated at 2.250 billion US dollars out of which $ 360 million or 16 percent has been sanctioned by the World Bank with maturity period of 20 years. Other donors include the government of Japan with a loan of $ 350 million (15.6 percent), Asian Development Bank with $300 million (13.3 percent), government of Germany with $ 150 million (6.6 percent), European Investment Bank with $ 40 million (2.7 percent) and Islamic Development Bank with $ 40 million (2.7 percent) while Wapda's internal cash generation would provide Rs. 850 million beside $ 153 million being Wapda's share in foreign exchange.

A source in the Ministry of Finance told this correspondent that the current stage of completion is about half a way behind the schedule, and it needs at least fifty percent increase in the speed of work just to catch up to it. Due to lack of availability of rupee component payment to affectees had become a problem.

Since it is not clear as to when the GoP funds will be made available as per schedule the position of the release of foreign component is also not crystal clear. The World Bank alone has a US$ 360 million financing component. The source said resource crunch is mainly due to WAPDA's poor financial health. Because of a massive overdraft and lingering debt it is finding difficult to fund its investment commitments, even for the running projects. The government has already decided to provide Wapda with a liquidity injection and to write off Rs. 35 billion of its debt.

It may be recalled here that the relatively slow pace of construction of the Ghazi Barotha project due partly to the resource gap with Wapda and consequent mishandling of private contractors including the foreign based contracting companies had upset the foreign donor agencies about two years ago who were compelled to vigorously suggest corporatisation and privatization of the Ghazi Barotha project. Back in 1998 the proposal was accepted by the Ministry of Water and Power which had chalked out a detailed plan for the implementation to this proposal.

However, the plans which were earlier supported by Wapda authorities, were finally dropped since it backed out of its earlier concurrence. As a result of the widening of the resource gap with Wapda, the fate of the Ghazi Barotha project appears to have run into uncertainty. It is indeed a tragedy that an important mega project in the power sector which is being fully supported by the international financial institutions with loan assistance, has come to a stage when its implementation on due dates has become doubtful. It may be recalled here that the World Bank and the Asian Development Bank in addition to the government of Japan had been persuaded after long-extended negotiations for their financial support to this project but now these institutions appear fed up with the difficulties they are facing in their dealings with Wapda.