Diamer Bhasha dam: ADB ties financing with National Assembly consent

The Asian Development Bank and the United States may co-finance 4500 MW Diamer Bhasha dam for which the Ministry of Water and Power must first seek National Assembly''s consent, a pre loan condition of the ADB, Business Recorder has learnt. According to sources, the Economic Affairs Division has sent a reminder to the ministry to seek National Assembly''s consent to meet the ADB condition.
Sources revealed that the government of Pakistan requested the US, during the ongoing strategic dialogue, to provide one billion dollars for the dam. The ADB has asked Pakistan to provide assurances/commitments made by other donors to finance the dam. The ADB assistance is expected to range between $2-3 billion, sources said. If the US agrees to extend one billion dollars for the project, it would be a big step in accessing financing from other sources.
Sources maintained that Islamic Development Bank had also expressed interest in financing the Basha dam. According to official sources, the cost of the dam has increased from $8.5 billion in 2005 to $15 billion due to the rupee depreciation against the dollar. The ADB has reportedly sought a firm and long-term commitment across the political spectrum through the passage of a resolution from the National Assembly.
The bank wants complete consensus among all the stakeholders on the project as it fears that any controversy on the dam would endanger its investment. "The ADB also wants consensus on the resettlement of victims of Basha Dam," sources said, adding that the bank had also desired a detailed report on environmental issues. "The ADB''s main concerns are environmental impact and its resolution, resettlement plan for the victims and consent of National Assembly on the Diamer Basha Dam," sources said.
Federal government and the victims of Diamer Basha dam have recently reached an ''out of court'' settlement'' under which the government will provide Rs 40 billion compensation. According to initial estimates, upto 30,000 families living in 31 villages will be affected due to construction of dam. Under the plan, the government will build nine model villages for the victims.
The ADB had sought commitment from the government to impose tax on water used for irrigation purposes as a precondition for financing Diamer Basha Dam project. "Yes, the ADB had tabled this condition but it had not been discussed seriously," sources maintained.
The ADB was of the view that water would be stored in the dam for irrigation and therefore it should be taxed. At present, the government receives "Abiana" from farmers on agriculture land. The ADB argues that the government is giving subsidy on water for irrigating agriculture land.