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US pledges $3.5b amid growing power crisis in Pakistan
Publication Date : 03-01-2013
As electricity shortage in Pakistan increased to about 5,000 megawatt yesterday despite reduced winter demand, the United States has agreed to provide US$3.5 billion for the $14.5 billion Diamer-Bhasha dam project.
The ministry of water and power informed the National Assembly’s Standing Committee on Water and Power that the government had been requested to postpone the payment of $4.5 billion interest during construction and waive taxes and duties on import of machinery and equipment for the project.
The government is also persuading China, Korea and Turkey to participate as financiers and contractors in the project which will be offered for international competitive bidding on the basis of suppliers’ credit.
The Special Secretary for Water and Power, Himayatullah, informed the committee at a meeting presided over by Member of National Assembly (MNA) Syed Ghulam Mustafa Shah that the total power generation yesterday was 9,000MW and with a maximum demand of around 14,000MW, there was a shortfall of 4,600-5,000MW.
He said that in summer the maximum generation went up to 15,000MW with the peak demand being at 17,500MW.
The official said the hydroelectric power generation had declined to 920MW from 6,500MW because of annual canal closure.
This resulted in total dependence on expensive furnace oil.
Members of the committee asked about the status of foreign funding for Diamer-Bhasha dam, its environmental impact assessment, if India was opposing the project and whether it could be taken up and completed despite reluctance of major international agencies like the World Bank to provide funds.
Wapda Chairman Syed Raghib Abbas said: “The US government has principally agreed to provide $3.5 billion for the project” in annual instalments of $250 million.
He said the estimated cost of the project had increased to $14.5 billion which was a difficult challenge to meet but it would be completed at all cost because of its benefits like flood control, energy generation and water storage.
He said if the US financing was approved, the remaining foreign funding requirement would come down to $4.5 billion which would be arranged through alternative options like offering the project for construction through suppliers’ credit or issuance of bonds, investment by independent investors through a special arrangement or involving overseas Pakistan under a private investment model.
He said China, Turkey and Korea were expected to provide funds and participate in construction.
The chief of the Water and Power Development Authority said the government had been requested to postpone imposition of $4.5 billion interest during construction for repayment after the project’s completion, while some cost cutting could also be done by exempting various components of the project from duties and taxes.
He said a positive development was that the hydel power project industry was in recession globally that would divert contractors, suppliers and financiers to Pakistan. “Pakistan is the only place in the world at present with potential investment opportunities.”
He said there was no going back on the project despite difficulties. “Pakistan’s future depends on Diamer-Bhasha dam and we will overcome all challenges and complete the project at all costs.”
When asked about a lukewarm response of the World Bank, the special secretary said financing could be arranged through different options without its support. “It can get delayed but not stopped or given up.”
The Wapda chairman said 9 billion rupees ($92.38 million) had so far been spent on the project for infrastructure development, compensation for land and feasibility studies.
He said the government was trying to persuade the Asian Development Bank to continue its support even if the World Bank stayed away.
The committee’s members opposed a draft amendment to the Electricity Act of 1910 when they were informed that it would also require changes in the Pakistan Penal Code (PPC) and Criminal Procedure Code (CrPC) for increasing offences and penalties on consumers.
A member said the related offences and penalties were already being misused by power companies and these should not be enhanced.
He said power companies resorted to over-billing and even if it was disputed by consumers they were required to deposit at least 50 per cent of the amount. This way the power companies recovered much higher amount from a consumer and then also imposed penalty if the decision went against him. The committee deferred the amendment bill till its next meeting.