ISLAMABAD: The federal government is reportedly weighing different options to finance Diamer Bhasha Hydropower Project as development partners are reluctant to commit financing of about $ 10 billion ($ 8 billion + $ 2 billion cost of transmission line), well informed sources in Ministry of Water Resources told Business Recorder.
This was the crux of inter-ministerial meeting, held on August 19, 2024 in Prime Minister House under the chairmanship of Minister for Economic Affairs and Establishment, Ahad Cheema.
Minister EAD shared some concerns expressed by members of the Federal Cabinet about the future viability of the Diamer Bhasha Dam Project, given its high financing requirements and delays in execution, especially since financial closure has not yet been achieved.
He noted the need for an in-house review before the government can take a decision on how to proceed further in this strategic project.
Federal Minister for Water Resources, Dr. Musadik Masood Malik mentioned that the total cost of the project is around $8 billion and the cost of transmission line will be added to this amount. He further highlighted the strategic importance of the project for the country’s water reserves.
Chairman WAPDA, Lt Gen Sajjad Ghani (Retd) gave a presentation on the project, mentioning the project’s benefits of water storage i.e. 6.4 MAF (million acre feet) and hydroelectricity that would be generated i.e. 18.l billion units annually.
On a query from the Minister for EAD/chair, the Chairman WAPDA responded that the cost per unit is Rs. 15, as per dollar rate of last year. He also mentioned that foreign financing needs, beyond the already arranged $500 million, are $3.5 billion, with equity of$1.2 billion and debt in foreign currency of$2.3 billion. He stated that Diamer Bhasha hydropower project is being financed out of WAPDA’S existing tariff revenue from hydropower generation, adding that only the cost of power generation component of the project would be recovered from consumers.
The Secretary EADD Kazim Niaz highlighted that development partners, for geo- strategic reasons, hesitated to committing financing for the project. Bilateral partners are, generally, reluctant to financing projects which require such a large amount of financing. However, he said recent efforts at the OPEC Fund’s Development Forum in June of 2024 yielded some positive results and a mission from the Saudi Fund for Development (SFD) is expected to visit the project in September.
“Once we have a foot in the door, then requests for funding may be made to Asian Infrastructure Investment Bank(AIIB) or China as well,” the sources quoted Secretary EAD as saying.
Federal Minister for Water Resources stated that if 6 per cent or even 3percent GDP growth annually is achieved per year for the next 10years and if already committed projects are not delayed Pakistan is likely to have surplus electricity.
He argued that if financial closure for the project is possible, he would support continuing with the project, notwithstanding the reputational cost if it is decided to slow down or not continue project execution.
Federal Minister for Power, Awais Leghari, stated that a feasibility study of the transmission line can be carried out soon so that the government has an exact idea of how much the total financing cost of the project would be, adding that not having a transmission line installed in time may result in additional costs.
After threadbare discussion, the meeting decided that a working group comprising representatives from WAPDA, Ministry of Water Resources and Power would be constituted which would give recommendations on how to proceed further with the project. The working group will give its recommendations within two weeks.
Copyright Business Recorder, 2024