Germany Funded Projects
What has become of the talks for
funding eight hydropower projects?
It’s nearly five years since the talks were initiated, but nothing concrete seems to have come out of them to date
By Kaleem Omar

T.S. Eliot said, “Between the reality and the response / falls the shadow.” This is true of many things, including, in Pakistan, the whole issue of economic problems. The “reality”, in this context, is the specific problem that needs to be addressed. The ‘response” is what, if anything, is done about it. The ‘shadow” is the time lag between the identification of a project and its implementation. This time lag often tends to stretch and stretch for so many years that the project in question either ends up costing many times the original estimate or is abandoned altogether.

One of the main reasons for this unfortunate state of affairs is an inefficient implementation methodology and the lack of a monitoring mechanism that would keep the government of the day informed about the project’s rate of progress and hindrances standing in the way of speeding things up.

A case in point is the talks that were initiated with Germany back in January 2001 to arrange funding for the construction of eight hydropower projects.

A two-member delegation from Germany’s KFW bank, a state-owned export finance agency, arrived in Islamabad on January 19, 2004 for three days of talks with Pakistani officials on funding eight hydropower projects. The delegation, consisted of KFW’s Asia Division Energy Sector Policy Chief Peter Pischke and Policy Project Manager Olaf Zymelka, also discussed the funding of several power distribution projects with Wapda’s National Transmission Dispatch Company, including the 550kv Ghakhar Mandi Grid Station Project.

The high-head hydropower generation projects included the 963mw Neelum-Jhelum Hydropower Project, the 130mvv Duber Khwar Hydropower Project and the 28mw Summer Garh Hydropower Project. The low-head hydropower generation projects included the 120mw Taunsa Hydropower Project, the 16mw Rohri Canal Hydropower Project, the 9.66mw Upper Chenab-M Hydropower Project, the 5.83mw Upper Chenab-L Hydropower Project, the 1.5mw Chor Nullah Hydropower Project and the 1.25mw Spath Gah Hydropower Project.

The original plan of the Neelum-Jhelum Hydropower Project envisaged the diversion of the waters of the River Neelum waters at Nauseri, about 41 km upstream of the Domel bend, through tunnels to create a head of 213 metres out-falling near Majhoi into the upper limb of the River Jhelum, for generating 500mw of power.

However, under an agreed improved option presented by the project’s Norwegian consultants, Norconsult International, the plan later called for the waters of the River Neelum to be diverted into the lower limb of the River Jhelum in a single stretch through a 32.5 km-long tunnel system, thereby generating 963mw of power.

Norconsult began work on updating the project’s feasibility report in January 1995 and completed the project’s detailed engineering design in 1997, under a credit arrangement signed with the Norwegian government.

The project was offered to the Private Power Cell of the Azad Kashmir government through the Ministry of Water and Power’s Private Power Infrastructure Board for bidding under the Pakistan government’s 1998 power policy, which that year replaced the Benazir Bhutto government’s 1994 power policy.

Meanwhile, preliminary work on the project continued under the auspices of the Water and Power Development Authority’s Hydro-Electric Planning Organisation, with the approval of the Ministry of Water and Power. The revised PC-1 was prepared and submitted to the ministry for approval in January 1999. But approval was not granted at that time due to the expected implementation of the project in the private sector.

The Pakistan government later decided to implement the project in the public sector, with Wapda being designated as the implementing agency. The project’s updated and revised PC-1 was eventually approved by the Executive Committee of the National Economic Council (Ecnec) in February 2002, for a total cost of Rs 84.50 billion, including a foreign exchange component equivalent to Rs 46.66 billion.

Documents to pre-qualify bidders for the project were vetted by Wapda’s Central Contract Cell in 2003. Expressions of Interest from construction companies for building the project were expected to be invited by Wapda as soon as arrangements for financing the project had been firmed up with foreign aid donors.

It was in this context that the January 2004 talks in Islamabad with the KFW delegation took place, following up on talks held a few days earlier in Bonn. At the Bonn talks it was decided that Germany would send a KFW team to Pakistan to inspect the Neelum-Jhelum project site as well as other hydropower projects sites and hold talks with Pakistani officials on financing the projects. The KFW team arrived in Pakistan on January 19, 2004 and was expected to visit the project sites that same week.

KFW has been involved in financing public sector projects in Pakistan for many years. The projects include many in the power sector.

The 130mw Duber Khwar Hydro Power Project was to be built on the River Duber Khwar, a right-bank tributary of the River Indus near Pattan in NWF, 265km from Islamabad. The project’s salient features included three generation units with a combined installed generation capacity of 130mw, a gross head of 1,781 feet, and an estimated annual power generation of 750 million kilowatt/hours (kwh).

The project’s PC-1, submitted by Wapda to the Ministry of Water and Power, was discussed at a meeting of the Central Development Working Party (CDWP) and recommended for approval by Ecnec. Supplementary topographic and road survey work had been completed by then. Construction of a project model at the Nandipur Research Station near Gujranwala had also been completed by then and hydro-flow tests were in progress.

Wapda’s Hydro-Electric Planning Organisation (Hepo) was entrusted with the task of planning hydropower projects with a generation potential of 5mw or more in the country’s riverine system and on existing canals and barrages on the Indus plains.

Pursuant to specific directives from the government, Hepo was also involved in identifying and ranking the generation potential of hydropower schemes, including potential sites for small schemes. Hepo also conducted surveys and surface and sub-surface geo-technical investigations for Wapda’s hydropower projects. It also carried out similar assignments for other government agencies.

After the launch of the then-government’s ambitious “Vision 2025” water and power development programme in 2001, Hepo’s responsibilities were further increased as the organisation had been entrusted with the planning, investigation and development of a large number of potential hydropower projects on a fast-track basis.

This included preparing feasibility studies for small hydropower projects on existing canals and barrages in Punjab and Sindh. The government approved the programme in January 2001. Thereafter, a total of 591 sites with a combined general potential of 649mw were identified along various canals and barrages across the country.

The government approved the programme’s PC-II in October 2001. Data collected by Hepo was reviewed and additional data was in the process of being collected. Canal and discharge data for all canals and distributaries with a flow-capacity of 200 cusecs (cubic feet of water per second) was also in the process of being collected.

Three sites – Machai, Pakpattan and Rohri – were identified by Hepo as pilot projects. Meanwhile, work on seven other sites was in progress. Nine sites were allocated to the China National Machinery and Equipment Corporation for development on a turnkey basis. International and local manufacturers were consulted for the local manufacturing of electrical and mechanical equipment for the projects. Meanwhile, Hepo had also developed standardised design and manufacturing criteria for the equipment proposed to be locally manufactured.

Funding for low-head hydropower generation projects at five of the identified sites featured feature in the January 2004 talks with the KFW delegation. The five sites had a combined generation potential of about 35mw. While this did not sound like much in the context of the country’s overall power needs, one of the plus features of the scheme was the relatively low cost of the individual projects.

Another plus feature of the scheme was that it would allow hydropower generation plants to be located close to rural demand centres. This would allow electricity to be supplied to villages and agricultural tubewells without having to build long-distance transmission lines to carry power to the demand centres from the generation plants.

The high cost of building long-distance transmission lines adds to the cost of electricity supplied to consumers. Power transmitted over long distances also adds to line losses. At the then-figure of 28 per cent, Wapda’s line losses were amongst the highest in the world. Building small hydropower generation plants along canals in the Indus plains near rural demand centres would have helped Wapda to reduce line losses.

Another hydropower scheme that Hepo was working on in those days was the Jinnah Hydro Power Project. The project was proposed to be constructed on the right side of the Jinnah Barrage on the River Indus, about 5 km downstream of Kalabagh town and 234km from Islamabad. The project’s salient features included eight power generation units with a combined capacity of 96mw, a gross head of 16 feet, and an annual estimated power generation of 688 million-kwh.

The project’s PC-1 was approved by the Ministry of Water and Power and the Pakistan government. In December 2001, the government and China’s Dongfong Electric Corporation (Dec) signed a memorandum of understanding (MoU) for the implementation of the project on a turnkey basis. A Dec delegation visited the project site in the last week of December 2001.

In accordance with the terms of the MoU, Dec submitted its commercial and technical proposal to Wapda in June 2002. Pakistani and Dec officials were later engaged in talks on financing for the project.

Along with the 1,450mw run-of-the-river Ghazi Barotha Hydro Power Project on the River Indus 52 km downstream of Tarbela, which came partly on-stream in mid-2003 with the commissioning of the first of five 290mw generation units and fully on-stream 18 months later, the proposed new hydropower projects would have helped to improve the country’s present highly skewed ratio of 70:30 between thermal and hydel power plants, enabling Wapda to cut generation costs and, hopefully, supply cheaper electricity to consumers.

Considering that Pakistan’s electricity tariffs are now the highest in the world, the need for cheaper electricity has become all the more pressing in recent years. Hydropower is much cheaper to produce than thermal power. So the sooner more hydropower plants are built the better it will be for the country’s economy. That’s why talks with donor agencies like KFW, the World Bank, the Asian Development Bank and others to finance hydropower projects are so important.