ISLAMABAD Amid a controversy over expensive rental power projects, a $800 million foreign investment for cheap hydroelectric power generation is unlikely to materialise mainly because of bureaucratic wrangling, despite full support extended by federal and Azad Kashmir governments.

This comes at a time when the federal government is finding it difficult to lure foreign investment to meet growing energy shortfalls and is approaching world capitals to secure supplies of oil, natural gas and liquefied gas for power generation at much higher prices, involving massive outflow of foreign exchange.

Background interviews and official documents available with Dawn suggest that after pursuing the 500-MW Mahl power project at home and abroad for almost four years now, the process 'has been stopped altogether.'

The sources said Korea's leading public sector investors, after having paid relevant government fees and other expenses, were literally running from federal to AJK governments through direct and diplomatic channels seeking permission to proceed with the construction of 500-MW Mahl Hydropower project for which they had been selected by the government through international competitive bidding.

The main hurdle, the sources said, was that a senior official of the federal government, who would be reaching retirement age soon, wanted the $800 million project on the River Jhelum in Azad Kashmir to be developed in the public sector so he could become the project director.

Informed sources said that senior bureaucrats were clearly changing their goal posts and have now informed the Korean investors that the government had failed to finalise relevant procedures under the power policy announced in 2002 and under which they had called international bids and made selections.

The sources said a ceremony for the signing of a memorandum of understanding to allow Kapco, Kompico and Sambu Construction of Korea was cancelled at the eleventh hour, although the chairman of the Board of Investment, the ministry of finance and the prime minister of Azad Kashmir had given their consent. AJK chief secretary Khalid Sultan said 'I cannot say anything about the project because there is nothing that could be talked about.' When asked why was the project being stopped at an advanced stage, he said that some people with vested interest were responsible; misleading (the media) about the project. 'You better bring them to my office.'

Secretary electricity Azad Kashmir Iqbal Mohiuddin, however, confirmed in writing that the project had been advertised for development under power generation policy of 2002 and six firms, including Korean firms, had been registered.

However, since the approved mechanism for development of hydropower projects under public-private partnership was not available, the project could not be processed further, although the AJK government had instructed to 'proceed further for the development of the project' through the assistance of the federal finance ministry.

Interestingly, BoI chairman Saleem Mandviwala, briefed the Azad Kashmir prime minister at a meeting that no dam could be constructed in the country despite investment interests shown by many foreign companies, especially by the Koreans.

In the meeting, chairman Wapda told the participants that 'if companies like Sambu/Kompico are interested to develop and invest in this project on built, own, operate and transfer (BOOT) basis, Wapda has no objection whatsoever and would rather facilitate them in the light of the Energy Policy.'

Documents suggest that before the signing of an MoU, the AJK prime minister and his technical team and chairman of the Board of Investment visited South Korea for on-ground inspection of the facilities of Kapco, Kompico and Sambu which were producing 84,000 megawatts of hydro, nuclear and thermal electricity.

Subsequently, the Pakistan embassy in Seoul arranged an MoU signing ceremony.

In a communication to the government, representatives of the Korean companies claimed that it had been jointly decided that AJK chief secretary would represent the AJK government at the signing ceremony. But he regretted at the eleventh hour to attend the ceremony that 'was embarrassing for the chairman BoI and Pakistan's ambassador in Korea to decline to sign the MoU.'

The AJK electricity secretary said the project had been taken up again before the Hydro Electricity Board (HEB) and it was decided that the project would be developed in collaboration with Wapda and hence it could not be allotted to any investor without completion of procedures laid down in the 2002 policy, although the bids had been invited under the same policy.

'On the other hand, this project could be implemented in private sector through Private Power and Infrastructure Board (PPIB) under the 2002 policy.'

The sources said the Korean companies had written protest letters to the ministry of foreign affairs, the AJK prime minister and other relevant forums and asked for independent investigations into the issue to protect relations between the two countries.