Funding for Neelam-Jhelum project: Cabinet to approve raise in power tariff on December 12

The Cabinet will approve a 10 paisa raise in power tariff for the financing of much-delayed 960 MW Neelam-Jhelum Hydropower Project, in its meeting on December 12, well-placed official sources told Business Recorder.
The Economic Co-ordination Committee of the Cabinet on August 17, 2007 approved in principle an increase in tariff to finance the mega hydel power project with a recommendation that the decision should be placed before the Cabinet in its forthcoming meeting. The sources said the Ministry of Water and Power had forwarded the summary to the Cabinet in October but the issue was kept pending for the caretaker setup due to political considerations. During discussions, the ECC agreed that the project was vital for economic growth and security and deserved immediate endorsement especially in the context of water sharing with India on Jhelum River.
The sources said Pakistan Commission for Indus Waters (PCIW) had also asked the government to reach a decision on tariff so that development work could be started as early as possible.
Pakistan has also decided to take up the issue of Kishenganga with the neutral expert so that India could be barred from constructing this controversial project on Jhelum River.
The sources said Wapda had invited bids for the project on the basis of buyer''s credit worthiness as per the ECC decision of February 7. After evaluation of bids, Wapda approved and awarded the contract to the lowest bidder, M/s CCGC- CMEC of China, worth Rs 90.885 billion, of which Rs 5.27 billion, required for mobilisation advance to be paid to the contractor and the consultant during 2006-07, has already been released.
The sources said the financing plan had been approved by a committee headed by then prime minister''s advisor on finance, Dr Salman Shah (now caretaker Finance Minister), which suggested a 10 paisa per unit increase in Wapda tariff excluding lifeline consumers for the fund to be called ''Neelam-Jhelum Hydropower Development Fund'' which will generate an estimated Rs 6 billion. However, after detailed discussions, the ECC decided a 10 paisa raise in tariff for Karachi Electric Supply Corporation consumers.
The funds arranged through power surcharge may be kept in an escrow account titled Neelum-Jhelum Company. The debt/equity ratio of the project would be around 50:50 and the paid-up capital would suitably be increased to meet financing requirements.