The World Bank is considering providing $6 million for Infrastructure Project Development Facility (IPDF) to develop an enabling environment for hydropower business in Pakistan.
According to WB sources, the component will build the capacity of the Infrastructure Project Development Facility (IPDF), in particular the new water cell tasked with developing financing strategies for water sector programmes and hydropower infrastructure and with providing advice on a variety of financial, fiscal, legal and regulatory issues.
The project will help to review existing institutional, legal and administrative framework for financing water infrastructure and the potential for private sector participation in the development of multipurpose water resources development projects based on international best practices, asset ownership, benefit-sharing alternatives, etc.
The project will also help for development of an enabling framework for licensing and regulating hydropower projects (both run of river and reservoir based projects); for establishing tariffs and a carbon credit mechanism; and for scrutinising existing assets to generate funding for investments in water and hydropower development.
Infrastructure Project Development Facility (IPDF), the WB consultants to review of financial and fiscal regimes for private sector, domestic and foreign involvement in the development of major hydropower projects in the Indus system, and identification of appropriate sources of financing worldwide.
According to update project report, returns to investment in the water sector (irrigation, hydropower, domestic and industrial uses as well as for environment) are very high in Pakistan. Despite large needs for investments in the sector to expand water supplies, to improve water management and control and to upgrade and modernise the century old system, the required investments are not forthcoming, resulting in its continued stagnation and deterioration.
There has to be a shift in the financing strategy for multipurpose storages. So far, the government has only tapped public resources for investments in the water and hydropower systems and currently owns major assets in these sectors. Hydropower generation provides substantial financial flows and could be of great interest to the private sector if these investments are structured properly, WB report added.
WB report mentioned that the extent of the investment required demands expanding the range of options to include, for example, non-traditional methods for financing these infrastructure, and involving the domestic and foreign private sector, and perhaps even privatising the existing assets and/or building public private partnerships (PPPs).
WB report mentioned that the main challenge is to structure a water and hydropower investment programme in a manner that would enable the mobilisation of financing from non-traditional sources so that the system investments can keep pace with growing demands in the immediate future.
The water sector issues are enormous and complex, and addressing them would require a series of investments and long-term commitment on the part of the government. The proposed project would help the government to address issues related to water resources management in the main river system, allowing a transparent way for water flow forecasting, availability, distribution and accounting, and thus building trust.
The project will also help to address water policy, technical issues necessary for the investment programme and assist in developing a financing strategy and a strategic social and environmental assessment framework necessary for the large investment programme.
Some support would be provided under the project to provinces to develop better linkages between the federal and provincial systems. The support to provinces is being provided under several ongoing and provincial operations such as the development policy loans (DPLs) to Punjab and Sindh Water Sector Improvement Project (WSIP) and it will be scaled up under Barrage Rehabilitation Programmes in Punjab and Sindh and possibly new operations in Balochistan and North West Frontier Province (NWFP).
It may be recalled that Pakistan government is seeking support from the World Bank for its knowledge, expertise and experience in the sector, in addition to its financing. This is particularly the case for this Project. More specifically, the Bank is expected to play a key role in providing support for: (i) strengthening water resource management institutions at the federal (main system level) and continuation of the measures for institutional strengthening already underway in provinces; (ii) support in developing financing strategies for investment program in water and hydropower sectors; (iii) strengthening project planning, development and management, ensuring appropriate technical designs, implementation and environmental and social features.
Comments
Comments are closed.