Jamshoro power project: battered rupee contributes to cost escalation

The depreciation of Pak rupee and the relatively rising cost of equipment/consultants has reportedly contributed to increase in 1200MW Jamshoro coal-fired power project from Rs 240 billion to Rs 254 billion in the modified PC-I, it was reliably learnt. Sources told Business Recorder that a modified PC-I was submitted to the Executive Committee of the National Economic Council (ECNEC), which was chaired by Finance Minister Ishaq Dar, before signing of a US$ 900 million loan agreement with the Asian Development Bank (ADB) to finance the project. The ECNEC had, in principle, given approval to the project.
Official documents available with Business Recorder reveal that a pre-Central Development Working Party (CDWP) meeting was held on January 15, 2014 wherein a modified PC-I submitted with rationalised cost was discussed in detail. As per modified PC-I at current exchange rate of Rs105.5 per dollar the cost of the project is estimated at Rs 254.72 billion as compared to Rs 240.094 billion which was projected in the original PC-I at an exchange rate of 98.5/US$. About 75 per cent cost of the project would be financed by borrowing from ADB and other financial institutions and 25 per cent cost would be met through budget. An amount of Rs 1.3 billion has been earmarked in current fiscal year's Federal Public Sector Development Programme for the project.
In addition, sources said that Ministry of Water and Power has not rationalised the cost as per earlier decision after conducting an in-depth analysis of many facets. The CDWP observations are as follows: (i) consultants considered maximum cost for any particular equipment (and that too of the specialised vendors) is basically not relevant to South and South East Asia in general and Pakistan in particular; (ii) all costs starting with and structured based on international prices give no consideration to local labour cost, exorbitant costs of flue gas de-sulphurization of plat etc; (iii) the engineering, procurement and construction management costs are extremely exorbitant.
The CDWP meeting's observation was that the cost of emission control equipment of Rs15 billion is on the higher side and the equipment is readily available at around Rs10 billion. The meeting also observed that the cost of turbine generator, EPC management, environmental remedy, site preparation, capacity development and physical contingencies can be significantly reduced.