Call for new dam royalty formula: WB suggests multi-factor approach
By Khaleeq Kiani
ISLAMABAD, Sept 25: The World Bank has asked Pakistan to introduce a multi-factor formula for payment of royalty on dams and hydropower projects to encourage construction of reservoirs, instead of payoffs merely on the basis of location of the power house.
Informed sources told Dawn on Sunday that the bank had proposed that a new formula be worked out by factoring in location of dam, power house, submerged area and displacement of human population in order to distribute royalties among all the stakeholders — provinces, local entities and individuals.
The sources said the World Bank, a major financier of Pakistan’s existing irrigation infrastructure, wanted replacement of the existing “anachronistic practice” in which royalty goes directly to a province just because a small piece of its land is used for the power house.
These issues, said the sources, were recently discussed at a stakeholders meeting on Pakistan’s water infrastructure development. The World Bank is also said to have proposed to improve contracting and pricing practices, the electricity market structure and trading rules, water rights and water use priorities besides effective implementation of the 1991 Water Accord and appointment of an independent auditor on provincial water uses.
This World Bank proposal is being seen by the official circles currently working on the construction of big dams as a recipe to counter a much-debated objection to building of new dams.
The argument is: why royalty should be paid on the basis of location of the power house to a province when the sacrifices of another province on account of displacement, submerged area and dam site may be much higher.
The Northern Area’s response to Bhasha dam has been lukewarm because the land to come under the dam falls in the Northern areas but it promised royalty to the NWFP because of location of the power house. Almost similar is the NWFP’s position on Kalabagh dam besides a number of other objections.
The bank, which recently showed willingness to fund construction of controversial big dams, has also given preference to Kalabagh dam over other dams on the basis of economic, financial, technical, safety, environmental and social considerations.
According to the sources, the bank is of the opinion that the design of Kalabagh dam is well advanced, which is not the case with Bhasha where there are considerable questions about the safe height of a dam.
Moreover, most of the involuntary resettlement of Kalabagh would be to nearby areas while in case of Bhasha, population would have to be relocated long distances away.
The sources said the Sindh government during a meeting raised objections over the size of its share in the proposed World Bank funding. The provincial irrigation adviser, these sources said, reminded the meeting that at the start of discussions on World Bank’s country assistance strategy in 2003, the bank had agreed to provide $1 billion to Sindh for capacity building and irrigation infrastructure improvements over a period of six years. However, the province was now promised $140 million.
The World Bank representatives, however, told the meeting that its $1 billion was for the whole of Pakistan under the CAS and it was up to the federal government and provinces how they shared that funding.
The World Bank said it tended to shy away from engagements in controversial water issues and its investments had dropped by about 90 per cent in the last decade but its board of directors reached the conclusion that its involvement was needed precisely where issues were complex and difficult.
“The broad’s conclusion was that the bank must re-engage which such ‘high-risk/high-reward’ investments when there was a sound case for doing so, and when the bank had a strong comparative advantage.”
