A Chinese company, China International Water and Electric Corporation (CWE), is reportedly unwilling to participate in international competitive bidding (ICB) for 1100 mw Kohala hydropower project, sources in PPIB told Business Recorder. The Power Ministry had sought clearance from the ECC for awarding the project without solicitation through advertisement.
Official documents, exclusively made available to this scribe, show that a Memorandum of Understanding (MoU) was agreed on October 16, 2008 in Beijing between the Ministry of Water and Power, Government of Pakistan and China International Water and Electric Corporation (CWE) for implementation of 1100 mw project located on River Jehlum in Azad Jammu & Kashmir (AJ&K). Earlier, the project was approved by Ecnec on August 23, 2006, for carrying out feasibility study, detailed engineering, design and tender documents through Wapda.
PPIB, which has been given the responsibility to implement the project on fast track basis through a Letter of Interest (LoI) to CWE on January 15, 2009 granted, in principle, approval for implementation of the project in the private sector. The Board of PPIB, headed by the Minister for Water and Power, in its meeting held on April 9, 2009 approved the issuance of LoI to CWE and recommended waivers in relation to certain codal formalities of the Power Policy 2002.
Sources said that when the proposal came before the Economic Co-ordination Committee (ECC) of the Cabinet on October 15, 2010, a number of questions were raised over transparency in awarding the project to CWE. The ECC constituted a committee, comprising Minister for Water and Power(convenor), Minister for Petroleum and Natural Resources, Secretaries of Finance, Economic Affairs Division, Water and Power and Managing Director PPIB, with the following Terms of Reference (ToRs):
(i) to examine all matters related to 1100 mw Kohala hydropower project and submit a ''way forward'' for its further implementation, keeping in view the commitments of the Chinese firm; (ii) to streamline the development and implementation of the much-needed hydropower projects in private sector and to attract foreign investment; and (iii) suggest a simplified mechanism for fast track induction of cheaper hydropower project in the national grid.
Sources said that the ECC''s decision consists of two parts. Pursuant to the first part, a meeting of the committee was held on November 23, 2010 wherein it was decided that (i) the policy guidelines for hydropower should be prepared on similar pattern as already approved by the ECC for thermal power projects, and (ii) the policy should not be project-specific and should cover all prospective hydropower sites, in general. To follow the decisions, a summary titled ''Guidelines for fast track induction of hydropower projects in national grid'' was circulated among all stakeholders for comments on January 8, 2011.
To deliberate upon second part related to the implementation of the project, another meeting of the committee was held on January 15, 2011 wherein the following decisions were taken: (i) a reference was to be sent to the Ministry of Finance regarding applicability of Public Procurement Rules for 1100 mw Kohala hydropower project, and (ii) PPIB was requested to seek feedback from China International Water and Electric Corporation (CWE) on the international competitive bidding (ICB).
According to official documents, the Cabinet considered the summary submitted by the Ministry of Water and Power on November 18, 2009 and accorded its ex post facto approval to the MoU. Since the project is located in AJ&K, the AJ&K Council Secretariat on July 31, 2009 conveyed approval of the AJ&K Council for development of the project in accordance with the terms of the MoU, through PPIB under the Policy for Power Generation 2002.
It was further provided in the LoI that prior to issuance of Letter of Support (LoS) under Power Policy 2002, the audited cost of the feasibility study shall be reimbursed by CWE to Wapda and that LoS will be issued after approval of the project by the GoP. Pursuant to the terms and conditions of the LoI, CWE successfully updated the feasibility study for the project to the satisfaction of Panel of Experts (PoEs) drawn from public and private sectors, that was earlier partially carried out by Wapda, within stipulated time of nine months, at no risk and cost to, and without any obligation on the part of GoP.
Power Policy 2002 permits and authorises processing by PPIB of raw site hydropower projects on unsolicited basis. However, the ECC, through its decision in Case No 126/8/2005 September 1, 2005 while considering "amendments in the Policy for Power Generation 2002 to meet the accelerated power demand in the country", approved the proposal that "for raw hydel and coal site projects, expression of interest will be invited through advertisement in the press and the sponsors, who submit the best proposal, as decided by PPIB Board, will be issued LoI for the feasibility study."
The Ministry, which was under pressure for awarding the project to the Chinese firm, maintains that Public Sector Development Program (PSDP) is unlikely to be able to support such a large development in the near future despite the fact that it would actually increase resource availability in Pakistan at a quarter of the cost currently being incurred.
"At this juncture, if a Chinese firm is committed to implement the project in the private sector and also is prepared to finance it, the government needs to encourage it," sources quoted the Water and Power Ministry as saying. Review and updating of the feasibility study by CWE is complete, and it was in the process of submitting tariff petition to NTDC/Nepra for tariff determination when the ECC barred the Ministry of Water and Power from proceeding further on the project until all matters are resolved. Sources said that this complex issue would be discussed in the next meeting of the ECC, to be held shortly.