ISLAMABAD: With the demand of transferring projects after expiry of lease, the provinces on Tuesday agreed on the draft of the new hydropower policy which envisages, handing over mega hydel power projects of 24200 Megawatt (Mw) including Diamer Bhasha Dam on Indus Cascade to foreign firms mainly Chinese companies for swift implementation after facing poor response from multilateral donors.
In the new policy, exemptions in duties and taxes during construction phase, income tax holiday for initial five years of operation will be offered to private investors.
However, major stakeholders in mega hydropower projects — AJK, GB and FATA had come up with a demand to raise hydel tariff rate like KP to increase their share in net hydel profit in the new ‘draft policy for development of mega hydel power projects,
Briefing the media, Chairman Water and Power Development Authority (WAPDA) Zafar Mahmood said that a high level meeting with all provinces including AJK, GB and FATA was held on Tuesday to give presentation on the new policy.
He said that provinces wanted transfer of projects after expiry of 30 years lease whereas territories like AJK, GB and FATA wanted raise in the share of net hydel profit like KP by increasing tariff rate.
“I personally believe that share of territories’ net hydel profit should be increased like KP,’ he said adding that otherwise he feared it could generate negative perceptions among them. He said that a summary had been moved to the water and power ministry to seek approval of the Economic Coordination Committee (ECC) in this regard.
Responding to a question, he said that all provinces had agreed on the draft of the new policy which would be tabled before the Council of Common Interests (CCI) for approval. He said that National Electric Power Regulatory Authority (NEPRA) and Central Power purchasing Agency (CPPA) had pointed out that projects could not be transferred to the respective provinces legally.
He said that Chinese companies were interested to take projects for implementation. He added that a feasibility study and detailed engineered designs required a lot of upfront money without return and international financers were also conscious about displaced population and environmental impact. “This is the reason, Pakistan has not been able to raise funds for the mega hydropower project,” he said.
“In some cases private investors succeeded in getting feasibility stage indicative tariff determined from NEPRA after completing feasibility study but failed to obtain financing/lending for the project due to land acquisition and resettlement issues,’ he said adding that this lengthy process results in inordinate delays in actual implementation of the project.
Multinational donors have their own policies and priorities for financing of development projects of different nature in different regions. Donor sensitivity regarding dislocation of people, their loss of employment, heritage, way of life and negative impact on environment also hampers financing for the projects.
In the new policy, the government would introduce two options to offer projects to the private sector. In the first option, projects in which the detailed engineering design has been completed by consulting firms of International repute, the government would invite investors to complete the project according to the design already approved and preference would be given on the basis of early completion. NEPRA would announce upfront tariff to offer projects to the private sector.
Before offering the project to the private investors, WAPDA will complete its task which includes complete and upgradation of the feasibility study and Engineering Design, environmental impact assessment, land acquisition and resettlement, construction of access roads, and bridges, power evacuation plan, power purchase agreement (PPA), feasibility stage tariff determined by NEPRA, and engaging the International Panel of Expert (IPE) for selection of bidders.
In the second option, ranking of bidders will be made on the basis of early completion and the successful bidder will provide performance bank guarantee at a rate to be prescribed and projects for which detailed engineering design has not been done. The investor would develop his own design and preference would be given on the basis of early completion and maximum output.
He said that the World Bank was funding the Dasu hydropower project which had unlocked financing for hydelprojects.He said that WAPDA had secured Rs 100 billion funding for the Neelum Jhelum hydropower project and Rs 140 billion for the Dasu hydropower project. “The financial close of Neelum Jhelum would be achieved this month,” he added.