Bhasha-Diamer project needs $7.8bn funding

Bhasha-Diamer project needs $7.8bn funding
ISLAMABAD, Jan 21: Wapda officials have informed President Pervez Musharraf that a technical study of the Bhasha-Diamer dam project will be ready by April, but the real problem lies in arranging $7.8 billion for building the dam.Informed sources told Dawn on Monday that Wapda had proposed that after finalising the technical study, a company should be set up to raise the funds needed to complete the dam by 2016.As demand for power continues to rise, the government has been putting pressure on Wapda to streamline work on the Bhasha dam which was in the most advanced stage compared to other four mega projects — Kalabagh, Munda, Kurrum Tangi and Akhori dams.According to the sources, Wapda officials have informed the president that $7.8 billion cost of the dam also included $1 billion additional cost which has to be met by the government for laying transmission line, building road network and other civil works in the area. "For power house and reservoir, foreign funding needs to be arranged while this $1 billion will have to be made available by the government if at all it wants to complete the project by 2016".However, the government has been assured that the amount of $1 billion would be recovered soon after the commissioning of the project. Wapda is expected to sort out soon other controversial issues relating to resettlement, cost of land, acquisition of land and environment.The sources said that due to rising inflation the cost of the project could go further up and that its "cost evaluation" would have to be firmed up again once Wapda completed the technical study.Storage capacity of the Bhasha-Diamer dam is also likely to be reduced from 7.34 million acre feet (MAF) to 6.34 MAF because of likely modification in the design of the dam.The dam has been planned in the Northern Areas of Pakistan on the River Indus. It will be located about 314 km upstream of Tarbela Dam and about 165 km downstream of Gilgit.The dam is expected to create a large reservoir with a gross capacity of 7.3 million acre feet submerging large tracts of land in the Diamer district. It will have a power generation capacity of 3360 megawatts and is expected to considerably ease the hydro- to -thermal power generation ratio in Pakistan.The sources also said that the government had in fact planned to borrow $18 billion from international banks to build Bhasha, Kalabagh dams and the Neelum-Jhelum hydro-electric power project.The decision to go to the international capital market was taken after the World Bank and Asian Development Bank said they could not provide the finances in the absence of consensus among the provinces on the projects.They also asked the government to clarify whether there was a fiscal space for undertaking projects of this magnitude.The sources said that the World Bank and the ADB first wanted the government to finalise feasibility studies for the five mega hydropower projects. So far, feasibility study for Kalabagh dam has been prepared.A senior official said the government had changed its strategy to arrange funding for the mega dams. "Now for each dam, a separate company will be set up to raise finances and initially the government has decided to arrange $16 billion for Neelum Jhelum, Kalabagh and Bhasha-Diamer dams"..He said that public-private partnership would be encouraged in the proposed companies for raising funds from international banks. "The government will make its equity investment in these companies but most of the finances will be arranged by them(companies)", he said.Local banks and financial institutions, the official, said, would also be approached by the proposed companies.However, the sources said that international banks would charge increased rate of interest for loans to the private companies. Moreover, the government will have to provide sovereign guarantee to foreign banks for loans to the proposed companies. "This is not good for the country as well as the economy," a source said ,adding that the government should sincerely try to remove differences among the provinces for building bigger dams and seek direct foreign loans on low mark-up from the World Bank and the ADB to avoid piling debt which had reached over $40 billion.
(Courtesy Daily Dawn)