According to a Business Recorder exclusive, the Private Power Infrastructure Board (PPIB) is facing stiff resistance from its members over plans for unsolicited hydropower projects. PPIB was created in 1994 and as per its website was a "One-Window Facilitator" to promote private sector participation in the power sector and facilitate investors in establishing private power projects and related infrastructure, execute Implementation Agreement (IA) with Project Sponsors and issue sovereign guarantees on behalf of Government of Pakistan. At present, the website states that only two hydro power projects are under construction: New Bong Escape Hydropower project (84 MW), sponsored by Laraib Energy Ltd with COD in May 2012 and Patrind Hydropower Project, sponsored by Star Hydropower (147 MW) with COD in December 2012. Four projects are coming up for expected financial close in December out of which three are expected to generate 1072 MW and one Gulpur (100MW) with project sponsor Mira in June this year. Thus PPIB's claim that its efforts would generate 2400 MW additional capacity has merit. However, three issues need to be highlighted and dealt with. First and foremost, the government has focused on Chinese assistance in hydropower projects - assistance that was the outcome of meetings between relevant Chinese officials and President Asif Ali Zardari that led to several memoranda of understanding (MoUs) signed. However, MoUs are non-binding agreements and the government would have been better advised to launch the process of International Competitive Bidding (ICB) that would automatically shortlist companies that are willing to put their money where their mouth is. However, if the government is engaged in exploiting Chinese interest in supporting our energy sector, a support that many regard as more meaningful than that being provided by the United States, then too it would be advisable to open restrictive ICB, or bidding restricted to Chinese companies alone, which is allowed under the PPRA rules. In short, to ensure that a deal is done an MoU is not considered as the best way to proceed forward. Secondly and equally importantly, it must be acknowledged that India has developed its indigenous capacity to build dams. This has strongly implied that India has the capacity to not only build a dam cheaper and quicker than what would have been possible had it been forced to go for ICB but it has also meant that the Indian government can, as a consequence, meet a greater portion of the dam costs domestically. This in turn implies that the environment mitigating report required by the multilaterals prior to the release of funds, a major deterrent to building hydel dams in the world today, is not required and the government can simply go to the international market place to raise money to build dams as, unlike multilateral/bilateral credit, the only consideration of an investor would be the rate of return. In marked contrast, however, Pakistan continues to rely on foreign expertise to undertake feasibility studies and design of the project and relies almost exclusively on multilateral/bilaterals to meet the bulk of the costs of mega dam projects which come attached with conditions. And to add insult to injury there are many hydel projects that have been held hostage to either intra-provincial disagreement with respect to the merits or demerits of a project in spite of a feasibility study clearly identifying the pros and cons of the project as well as the financial interests of members of the ruling elite. To deal with such issues effectively, there is a donor recommendation shared by several members of the political elite that urges the government to form an Energy Ministry that would allow for integration of all sources of energy that would enable the government to take informed decisions. Copyright Business Recorder, 2012
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