It is undoubtedly a matter of great satisfaction that the World Bank was able to unanimously approve the Dasu hydro electric power project on 10th June, 2014. It was a surprise that US administration which had earlier warned Pakistan that it would prefer to abstain due to a Congressional constraint also supported the plan and voted in favour. Earlier, all the 25 members of the World Bank's executive board, with Sri Indrawati, the managing director and chief operating officer in the chair, had met in Washington to consider Pakistan's request for financial support for the project. It was speculated that Finance Minister Ishaq Dar's telephone to US Treasury Secretary Jack Lew and Pakistan's embassy in Washington had played a key role in winning over the US endorsement and lobbying the Congress, the White House and the State Department. Following the approval of the project, Pakistan's ambassador to the US said that "today's decision by the World Bank is a reflection of the international financial institutions' confidence in Pakistan's economic revival and its clear vision to overcome the energy requirements of the country. It will also open the sector of hydel-power generation to the private participants." Giving a policy statement on the floor of the National Assembly on 11th June, 2014, Dar also confirmed that the World Bank's approval of dollar 588 million package for Dasu project (4500MW run of the river) was with one hundred percent vote and the financial closure of Dasu Dam was effective on Tuesday (10th June) night. Total cost of Dasu is Rs 700 billion while the cost of the first phase of the project is Rs 400 billion. Dar claimed that the World Bank's approval of the project reflected the confidence of the international community in the present government's economic policies and the US support was in line with the commitment made by the leadership of the two countries to enhance cooperation in the energy sector.
A unanimous approval of Dasu project by the World Bank's executive board is undoubtedly a great achievement and reflects the seriousness of the government in trying to overcome the energy crisis which has not only retarded the growth rate of country by almost two percentage points a year but has also slowed down industrial activity, increased unemployment, fuelled inflationary pressures, discouraged exports and adversely affected a number of other areas of the economy. Energy crisis in Pakistan which had been brewing since 2007 deepened by 2012 and continues to worsen since then. The absence of any effective planning, an economically and financially viable strategy and an incapacitated regulator had contributed to the present critical position. The most important element in the new strategy should be a total focus on the new generation, particularly on the increase in production of hydropower which is both cheap and environment-friendly. Another issue which needs particular attention is that electricity generated is almost fifty percent of the installed capacity due to inefficient recovery system, wear and tear of plants due to poor maintenance and an inappropriate fuel mix. It goes to the credit of the present government that it is making all-out efforts on all the fronts to improve the electricity situation. The settlement of a large part of the circular debt at the beginning of its tenure, a bold recovery drive, especially by Abid Sher Ali and continued efforts by the Prime Minister to involve multilateral financial institutions and foreign governments to increase energy supplies are some of the initiatives taken by the present government to overcome the crisis. It may be added that Rs 55 billion has already been allocated for Diamer-Bhasha dam and the process of land acquisition is under way. According to the latest news, international community has accepted that Pakistan does not need an NOC from any neighbouring country for this particular project.
Dasu hydro electric power project is definitely of crucial importance to meet the energy needs of the country and improve the economic fundamentals of the economy. Upon completion, it will substantially increase the generation capacity of the country, change the fuel mix, bring down the average cost of electricity generation and reduce subsidies in the budget. Progress on the project would also help forge the Pakistan-US partnership and further strengthen bilateral relations. Fortunately, Dasu project is also already appraised and the donors had earlier assured Pakistan that if it sends out the approval letter, IDA would give credit of dollar 700 million for resettlement and other preparatory works. However, it needs to be pointed out that this is the first major step and a lot of distance has still to be covered by efficient execution of the project to make the dream a reality. Also, the monetary impact of the project needs to be analysed very carefully by a group of professional economists because of the long gestation period of the project and a huge amount of liquidity required for the completion of the project. It is obvious that while the liquidity in the economy would be injected with the speed of the execution of the project, the productivity of the economy would only enhance after the completion of the project, ie, after a reasonable time lag. In the intervening period, a likely price impact of higher liquidity would need to be neutralised.
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