The Economic Co-ordination Committee (ECC) of the Cabinet was informed that Rs 404 billion cost of Neelum-Jhelum Hydropower Project is expected to increase further on account of price adjustment, exchange loss and interest. Sources said that a proposal was submitted by Ministry of Water and Power to the ECC meeting chaired by Finance Minister Ishaq Dar for extension in Neelum-Jhelum Surcharge because of further increase in the approved PC-I cost.
The cost increase was attributed to price adjustment, exchange loss and interest during construction of the project and expected revision of cost estimates may make the financing insufficient to cater to the growing needs of the project. The meeting was informed that up till October 2016, Rs 46.7 billion have been collected against the surcharge and another Rs 9 billion are estimated during the next one-and-a-half-year.
With 86 per cent overall physical progress, the project required firm financial commitment to achieve financial close and a smooth cash flow for its completion. The tentative date of completion of the first unit is February 2018.
In view of the critical stage of the project and the fact that earlier closing date of collection of Neelum-Jhelum Surcharge coincided with its completion, the ECC was requested to extend the closing date of collection of Neelum-Jhelum Surcharge for a further period of 18 months up to 30.06.2018 to reduce the shortfall by Rs 9bn.
While giving historic background, the meeting was informed that the project was approved by the Executive Committee of National Economic Council (Ecnec) on 28-02-2002 with a capacity to generate 969MW of electricity.
In order to establish prior rights of Pakistan on water of River Neelum over India, the construction of this project was taken up on priority and request for financing of the project was considered in a meeting chaired by the Prime Minister''s Adviser for Finance on 24-04-2007. The Ministry of Water and Power was directed to submit a summary to ECC for approval on 17-08-2007.
The ECC approved the proposal, in principle, subject contingent to that: (a) imposition of ten (10) paisa per unit of electricity on all consumers, excluding lifeline consumers, for the fund to be called "Neelum-Jhelum Hydropower Development Fund" for a period of eight (08) years only keeping in view the fact that the implementation period of the project was envisaged for such term from the date of commencement; and (b) the approval, in principle, will be placed before the Cabinet for endorsement.
Subsequently, the case was presented to the Cabinet and the decision was endorsed and to facilitate imposition of development surcharge, harmonisation of electricity tariff across the country among different distribution companies and to give effect to the financial proposals of the federal government for the year beginning on the first day of July 2008, certain provisions of the Regulation of Generation, Transmission and Distribution of Electric Power Act, 1997 were further amended.
The work on the project commenced in January 2008, and was facilitated by imposition of Rs 0.10 per unit Neelum-Jhelum surcharge for eight years till 31.12.2015. However, due to a complex underground geology and 2005 earthquake, massive changes were made in design and structure of the project and this process is still continuing on the recommendations of the engineers.
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