Hydropower projects: mismanagement of Wapda inflicts huge losses to exchequer

MUSHTAQ GHUMMAN

ISLAMABAD: Water and Power Development Authority (Wapda) has reportedly mismanaged different hydropower projects, including 969 Neelum Jhelum hydropower project and 1410 MW Tarbela Fourth Extension inflicting billions of rupees financial loss to the national exchequer. This was the crux of informal meetings held by this correspondent with officials of the Ministry of Water and Power. The cost of Neelum Jehlum has increased from Rs 15 billion to Rs 500 billion whereas billions of rupees have been wasted on Tarbela 4th Extension under the guise of accelerated work.

Former Chairman Wapda, Zafar Mehmood was forced to resign for not fulfilling his commitments and causing billions of rupees loss to the national exchequer due to poor planning. The incumbent Chairman Wapda, Lt-General Muzammal Hussain recently gave a detailed presentation to the Cabinet Committee on Energy (CCoE) headed by Prime Minister Nawaz Sharif on recovery of payment ($51 million) from the contractor for acceleration of Tarbela Fourth Extension project for the completion of the project by June 2017.

Giving the details of cost incurred by the contractor for acceleration of the civil works as directed by the Prime Minister during the groundbreaking ceremony of the project a Variation Order (VO)-2 was signed on March 5, 2015 which allowed additional payments to the contractor for completion by June 2017: (i) $23.37 million was to be used for construction of two batching plants, concrete pump, two tower cranes; additionally the contractor purchased four excavators, two loaders, 20 dump trucks, shotcrete machine, nine concrete mixers, two hydraulic drills, six hand air drills; hydraulic drill, 30 pump trucks, mobile crane and crawler was acquired on lease/rent; (ii) the contractor used $22.21 million for hiring additional labour for two shifts of 10-hours each [weekends and festival holidays included]; (iii) $5.59 million was used to build additional temporary buildings and living facilities, change of concrete cooling system. Chairman, Wapda informed the meeting that as result of Variation Order, a disputed claim of the contractor ($133 million) had been settled.

Chairman, Wapda further revealed that as result of the decision the Cabinet Committee on Energy on September 15, 2016 regarding recovery of the payment made to the contractor for acceleration of work Tarbela-4 for its completion by June 2017, the contractor had slowed down the work and issued a suspension of contract notice to Wapda. The contractor intimated that in case of recovery, he would initiate litigation in the international court and reclaim the already settled claim of $133 million.

Chairman, Wapda informed the meeting that as per industry standards, approximately 15-25% [$27 million] of the claimed amount would be payable. He stated that the inauguration timeline of the project was set for August 14, 2017 and in order to commission the project by 2017, the issue of recovery of the amount paid to the contractor for accelerated work may not be pursued as the resultant litigation would severely affect the timelines and the commissioning of the project and it may go beyond 2018.

Chairman Wapda further stated that the commissioning of the project by 2017 would add additional electricity of 197.4 MKWh with a revenue generation of $19 million, which would further increase to 3840 MKWh by September 30, 2018 with an added revenue of $366 million. He proposed that the implementation of the acceleration plan for completion of the project may be continued so that timeline for inauguration of the project by August 14, 2017 may be pursued.

However, he clarified that this was less-likely to be achieved due to slow-down in the work by the contractor in wake of the recovery plan of the amount paid to him on account of accelerated work. He stated that he would be able to finalise the new timeline for inauguration of the project in a few days after the recovery issue has been resolved with the contractor.

Chairman Wapda clarified that there will be no auto switching of schedule to original plan in case acceleration plan is aborted, and new timelines will have to be re-negotiated with contractors, which will entail further delays.

During the ensuing discussion, the Minister for Finance, Revenue, Economic Affairs, Statistics And Privatisation Ishaq Dar suggested that although the Chairman, Wapda had explained the efforts and investments made by the contractor, yet he had not explained the reasons for not achieving the committed accelerated timelines of June 2017. He further stated that the contractor had failed to deliver the project on desired progress for which additional payments were made. He suggested that the decision of the recovery of the paid amount from the contractor be left with the Chairman, Wapda and the Wapda Board of Directors.

The Secretary to the Prime Minister stated that the Variation Order was signed and payments made on the notion that the project would be completed by June 2017 as the accelerated timeline was not achieved. There is no justification for CCE to revise its earlier decision for recovery acceleration plan related payments. This will not only attract intense scrutiny, but will also set a bad precedent for dealing with contractors on other mega projects. Moreover, the causes of the delay were required to be investigated to determine whether the fault was on the part of Wapda or the contractor.

After detailed discussion, the CCoE directed that Chairman Wapda and Wapda Board of Directors take a decision regarding payments relating to acceleration plan of Tarbela-4th project.

The committee also directed to conduct a detailed inquiry to probe into the causes/reasons for not achieving the June 2017 timeline by the contractor, despite additional payments for acceleration of works and identification of all those responsible for causing the delay.

Prime Minister further directed Chairman, Wapda to make concerted efforts for completion of the project by August, 2017. An email was sent to spokesman of Wapda for Wapda's views on the matter however, no reply was received till the filing of this report. A senior official of Water and Power Ministry stated that they are waiting for the reply from Chairman Wapda who has been directed to conduct an inquiry, adding as soon as a reply is received it would be shared with the top office of the country.