MUZAFFARABAD: On paper it might be just another project whose cost has risen from Rs102 billion to Rs333 billion that is expected to be regularised on Wednesday when Prime Minister Yousuf Raza Gilani chairs a dedicated meeting of the cabinet committee on energy.
On the ground, however, the Neelum-Jhelum hydropower project seems to be an engineering marvel, the completion of which will not only provide 969MW of cheap electricity to the national grid, but also secure Pakistan’s water rights over the Neelum River, currently under threat from India’s water aggression.
A group of journalists visited the area recently.
Of the combined 55km length of the tunnel, about 18km is now complete, including eight smaller tunnels. The 32-km main tunnel, which is to divert Neelum waters from Nauseri to Chattar Kalas, has achieved about 4km progress.
The mighty Neelum has already been diverted through smaller 500-metre diversion tunnel to dry out the riverbed for construction of 786-foot dam that is currently in progress.
With just 30 per cent physical progress, the project has already started to change Azad Kashmir’s landscape. A few kilometers from the Line of Control, 41km off Azad Kashmir’s capital Muzaffarabad where even the armed forced used to have access through a narrow jeepable track often blocked by landslides and snow, a small locality of Nauseri, in the Neelum Valley, now has wide carpeted access road.
The presence of foreigners from as far as China and Venezuela and their interaction with local engineers and professionals is already witnessing a cultural change.
With this, hundreds of locals are getting on-job training, dozens of others being trained for tunnel boring machines (TBMs) in Germany and many others setting up businesses around the project area.
The construction of critical desander at the inlet of the project has, however, been marred by minor disputes with the residents who are still resisting evacuation of the areas despite fully compensated. The first component of the project is therefore facing a one-year delay as the local authorities struggle to manage a delicate dispute so close the Line of Control.
“All other components of the project are either ahead of schedule or on time,” according to General (retd) Mohammad Zubair, the chief executive officer of the Neelum-Jhelum Hydropower Company (NJHC) – a special-purpose vehicle created for the project implementation.
About 22-km downstream Muzaffarabad at Chattar Kalas, a mock exercise has just been completed for transportation of the country’s first TBM on a 70-ton 64 wheeler.
The people of the area have never seen a truck of more than 21 tons weight. The introduction of TBM that would advance the project completion by up to 24 months, originally lost to bureaucratic and political indecisiveness, is expected to revolutionise tunnel excavation techniques in Pakistan. In comparison, there are about 22 TBMs currently in operation in India.
“Our major focus now is to ensure that TBM reaches project site by the end of February so that its starts operations before the rainy season in March,” says Gen Zubair.
The TBM components have reached China from Germany and are currently under assembling process. The machine will arrive in Karachi by the end of January from where it will take about three weeks to reach Muzaffarabad.
The TBM will expedite the construction of 32-km tunnel that has to pass 400-metre underneath the Jhelum riverbed to reach Chattar Kalas where an underground powerhouse will be located to dispatch 5.15 billion units of electricity per annum to national grid at Ghakkar Mandi near Gujranwala.
Gen Zubair’s another worry is the expansion in the board of directors of NJHC which is expected to be approved by the prime minister on Dec 7.
Currently, the board is led by the Wapda chairman and comprises three members and three chief engineers. The federal government wants inclusion of an additional secretary each of the water and power ministry and economic affairs division and special secretary of the finance ministry to have direct access to the information relating to financial aspects of the project.
In view of a huge financing of Rs333 billion, the federal government may have a point in having direct monitoring, Gen Zubair’s concern is that this may cause delays in decision making.
“Currently we can call a board meeting on a day’s notice to resolve hitches in the project implementation given its national importance; it may take time to secure time from federal officers once they are on the board,” he said.
The cost escalation because of involvement of TBM, change in design and specifications after the 2005 earthquake and more importantly currency depreciation, has forced the government to secure $1.5 billion loans and equity participation from the Saudi Fund for Development (SFD) and Islamic Development Bank (IDB) for the project, now facing a financing shortfall of over Rs232 billion ($2.7 billion).
Separately, negotiations are already in advanced stages for finalisation of a $450 million (Rs39 billion) loan from the Exim Bank of China to bridge a huge financing gap arising out of over 296 per cent or Rs250 billion cost escalation.
The government was also considering raising funds from the local market through public-private participation, inviting leading banks, business houses and common citizens through different financial products, including long-term bonds for institutions and share sale through public subscription in view of project’s strong economic viability despite cost overruns.
While the IDB usually provides commercial loans, it is the SFD whose financing is normally considered a soft-term support.
The Fund’s loans are generally without conditions, made available quite quickly and easily and its repayment conditions are generous for up to 50 years plus 10-year grace period with servicing costs at about one per cent. Up to 60 per cent of such loans could be outright grants.
The project offers robust returns of about 22.5 per cent which meant the project cost could be recovered within 7 years after completion by mid-2016.
Even with increased cost, the average electricity generation cost has been estimated at about Rs2 per unit after first eight years of interest repayment.
The external financing had become all the more crucial for speedy deployment of TBM and its synchronisation with river crossing effort that is expected to reduce project implementation time by at least 18-24 months.
The contract for the project was awarded to a Chinese contractor (CGGC-CMEC) in Dec 2007. On the other hand, India planned to construct 18 hydropower projects along Neelum and Jhelum rivers, providing it with freedom to divert Neelum waters towards Wullar Lake in violation of the Indus Waters Treaty.
The Kishenganga hydropower project that has been challenged by Pakistan before the international court of arbitration could reduce river flows at Nauseri – the off-take point of Neelum-Jhelum project – by a minimum of 7 per cent and a maximum of 34 per cent, with an expected energy loss of 13 per cent of $141 million (Rs13 billion) per annum. This loss of capacity will be overcome through a 45MW additional power house at a diversion spillway.
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