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Construction of Dasu hydropower project in the doldrums

Construction of Dasu hydropower project in the doldrums

ISLAMABAD: The timely construction of $2.5 billion first phase of the Dasu hydropower project is in the doldrums owing to petty disputes among stakeholders which may lead to cancellation of international funding.

A senior official at the Economic Affairs Division told Dawn that they feared cancellation of $1.1 billion loan agreement by the World Bank on Nov 1 this year owing to the inability of the stakeholders — the federal and Khyber Pakhtunkhwa governments and Wapda — to complete land acquisition.

The acquisition of about 80,000 kanals of land is a fully funded component of the World Bank, having a precondition for its completion by Oct 31, 2016. The 4,320 megawatt (MW) Dasu HPP worth about $4.5 billion is one of the top-priority hydropower projects under the 2013 Power Policy and Vision-2025.

The World Bank is providing $590 million loan along with a $460m credit limit as partial risk guarantee for external commercial financing. Mid-term review of loan agreements has to be completed by Oct 31 this year. Separately, Wapda has contracted about Rs144bn from commercial banks to make available matching financing to meet local expenses.

At the heart of the dispute is a claim of the KP government to charge 2.5 per cent service charges from Wapda on account of land acquisition. This is unacceptable to Wapda.

“The justification being created by the Government of KP for fleecing 2.5pc charges is by declaring Wapda as a private company,” said a senior Wapda official requesting anonymity.

He said such charges had no legal authority and particularly when all services were already being paid for by the federal government through Wapda — a 100pc state-owned entity. This was also acknowledged by a former senior member of the Board of Revenue of the KP government.

Dispute and implications

The dispute has lingered on for more than 10 months now and in the process non-payment of compensation against the land has developed anxiety and dissatisfaction among people affected by the project who have now started protest and forcibly stopped construction works on many occasions. Violent protests are hampering construction activities which would delay the completion of the project with huge financial implications for all the three major stakeholders.

As a result of non-payment, the KP government had failed to stop illegal construction by locals on the land being marked for the project.

“The implication of such unlawful action would be alteration in the land categories causing thereby further increase in already negotiated land price. The district administration is unable to stop the process and the total financial bearing of this alteration is approximated to be Rs8-10bn,” an official said.

While a spokesman for the KP government did not reply when requested for comment over the issue, Zafaryab Khan, the spokesman for the water and power ministry, confirmed there were some issues with the project but declined to go into details.

He said that funds for land acquisition had been transferred to the provincial government.

“The land acquisition is a provincial matter and the federal government is taking up the matter with the provincial government to remove irritants,” he said.

After completion of the first stage, the project would generate about 33.5GWh per day, translating into Rs335m per day (at Rs10 per kWh). The Wapda official said that a 10-month delay in payment of land compensation would cause Rs100bn economic loss to the nation besides Rs11bn revenue loss to the KP government on account of net hydel profit at the rate of Rs37m per day.

As the cost of land acquisition is being funded by the World Bank besides the overall project cost the problem becomes more precarious because of the conditionality imposed by the World Bank that the amount earmarked for land acquisition must be disbursed within two years from the loan effectiveness, which in this case will expire in November, and if not achieved the funding would be withdrawn by the World Bank.

The project is to be constructed in Khyber Pakhtunkhwa on the Indus River, about 350km from Islamabad and 240km upstream of Tarbela Dam. Being executed by Wapda, the first phase of the project is scheduled for completion by 2019. Its second phase of another 2,160MW has to be completed by 2022. The priority project is being developed through the World Bank support to modernise and expand energy supply in the country. About 80,000 kanals of land is required for the project in Kohistan district.

In order to address concerns of local people, the federal government decided to have negotiated settlement at market rates through the provincial government instead of forced compulsory land acquisition. With approved rates after negotiations, Wapda had put Rs1.5bn at the disposal of district collector of Kohistan for the payment of land and property compensation of priority areas to the affected people.

Another Rs52.66m was also paid to the Kohistan official for establishment of a Land Acquisition and Assessment Unit, which also includes incentives for revenue staff along with deputy commissioner’s office and the revenue staff transferred from other districts to complete the land record.

Published in Dawn, August 2nd, 2016

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