ISLAMABAD, Aug 12: Pakistan is likely to lose its priority rights to build a 969mw hydro power project on River Jhelum owing to non-availability of finances, an official source told Dawn.

“We don’t have funds and there is no serious proposal on ground at present,” said a senior Water and Power Development Authority (Wapda) official. The project worth Rs84 billion was ready to take off and could be started within three months but funding was the real problem, he said.

Out of a total cost of Rs84 billion, a foreign financing of at least $800 million was required for the project while the remaining portion comprised local components, including land acquisition and some construction materials, he said.

India, the official said, was now reportedly preparing to invite tenders for a 450mw (150x3mw) Kishanganga hydro power project on the same river in the occupied Kashmir. India, too, was in the same quandary because no foreign financier was ready to bid for the project due to the location of the project in a geo-politically difficult region of occupied Kashmir, he said, but added that India could arrange local financing.

The official said under the 1960 Indus Waters Treaty, the country which starts the physical work first would have the priority rights over the river waters.

He said the chairman of Dongfong Corporation of China during a recent visit to Pakistan had expressed willingness to form a consortium with some other companies back home and promised to come back with a proposal but there was no progress on that account so far.

Another offer from M/s CNT of China, he further said, had been rejected by Wapda because it sought a power of attorney to seek finances on behalf of the authority. The company also wanted to hand over the construction and technical work of the project to another company and pull out of the project after arrangement of funds and award of the contract.

It is not Wapda’s policy to allow a foreign company to use its credibility to collect funds, secure the project and get it completed by a third party. The CNT’s funding offer of $1 billion was also subject to some hidden costs. It offered an interest rate of around two per cent but when calculated with service charges, etc., the total financing cost was coming to 8 to 9 per cent which was obviously not acceptable.

He did not agree to the notion that the government and Wapda were not taking it serious to materialise the project of Pakistan’s vital interest, saying the prime minister secretariat was seeking fortnightly updates on the subject from Wapda and the power ministry.

When contacted, Water and Power Additional Secretary Riaz Ahmad Khan said: “No progress as yet.” He said Dongfong was reportedly trying to form a consortium for the project but “we don’t have any formal proposal from them”.

Earlier, Wapda had invited expressions of interest (EoIs) from international companies so that the project could be implemented on international competitive bidding (ICB) basis with financing to be arranged by the contractors. Around 10 companies submitted EoIs but Wapda was not encouraged by the discussions with foreigners.

The sources said no funding had been earmarked for the project in the public sector development programme (PSDP 2003-4) due to non-availability of foreign funding for the project.

WATER DIVERSION: Water and power ministry sources said if the Neelum-Jhelum project was not started near Muzaffarabad in Azad Kashmir immediately, Pakistan would be obliged under the 1960 Indus Waters Treaty to allow India divert Jhelum waters for power generation.

The Executive Committee of the National Economic Council (Ecnec) had approved the project last year with the condition to execute the project after arranging requisite funding.

The appointment of consultants for the projects has also been pending till the arrangement of funding.

Diversion by India, the sources said, would not reduce the overall water level in Jhelum on the Pakistani side of the Line of Control (LoC) but this would affect the river flow. Decline in the river flow reduces the pressure required to generate electricity in Azad Kashmir’s Neelum-Jhelum project.

Under the treaty, India cannot change the flow of Jhelum river even for power generation that may affect any Pakistani power project. But, if there is no power project in Pakistan that could be affected on that particular river, India can divert the river for run-of-the river project but without any storage.

BAGLIHAR PLANT: Meanwhile, a high-level meeting has been convened on Saturday at the water and power ministry here to finalise the official strategy to tackle the issue of the contentious Baglihar hydro power plant on the Indian side of Chenab river in violation of Indus Waters Treaty, Qudssia Akhlaque adds.