ISLAMABAD: The federal government will shoulder half the cost of the Rs25.5 billion Greater Karachi Water Supply Scheme (K-IV), as per the orders of the prime minister in a bid to ease water scarcity in the country’s largest city. But the Sindh government has refused to absorb expected cost overruns of about Rs2 billion.

At a recent meeting, the Executive Committee of the National Economic Council (Ecnec) approved the allocation of Rs25.5 billion on the condition that any additional costs would be borne by the provincial government.

The condition was introduced by the Ministry of Planning and Development on the basis of what was called Sindh’s track record of delays in project implementation and cost overruns.

An official told Dawn: “Over the last 33 years, there was hardly a development project that was completed within the stipulated time and cost.”

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They keep on delaying over issues such as land acquisition and construction, causing losses to the national exchequer.

“Any further increase in cost will be borne by the government of Sindh from its own resources,” Planning and Development Secretary Hassan Nawaz Tarar said. In addition, the mechanism for project implementation and supervision will be evolved jointly by the federal and provincial governments, he added.

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But this was not acceptable to Syed Murad Ali Shah, the Sindh chief minister’s Adviser on Finance and Revenue. Sources told Dawn that Mr Shah insisted that the prime minister, on a recent visit to Karachi, had decided that the federal government would provide 50 per cent of the funds for the project and the centre and province would share whatever the total cost was upon completion.

Sources privy to the meeting said Mr Shah also hinted at a Rs2 billion cost overrun in the four years (2014-2018) it would take to complete the project. “This means you have already made up your mind to push up the cost,” Finance Minister Ishaq Dar is said to have quipped.

After some discussion it was decided that the project should be allowed to proceed with the approved cost of Rs25.5 billion and 50:50 sharing without considering any cost increase because it did not bode well for planning and cost estimates if those responsible for project delivery started discussing cost increases the day project costs were approved.

An official privy to the developments said the project was purely a provincial matter in the light of 18th Amendment and there should have been no federal funding for it because it had been originally planned two to three years ago.

However, given the importance of Karachi with its over 19 million people, the federal government had agreed to provide 33 per cent of the funding in 2012. The project cost was also rationalised from Rs29.8 billion to Rs24.05 billion.

In February 2013, Ecnec had allowed expenditures of Rs2 billion as anticipatory approval costs and asked the provincial government to confirm acquisition of 10,140 acres for right of way and land clearance with the project cost at Rs24.05 billion. Instead of these confirmations, the Sindh government submitted in June 2013 a revised project with cost estimates of Rs25.5 billion and a proposal to share the cost 50:50 with the centre.

The Planning Commission rejected the proposal and returned the plan with directives to meet the earlier decisions of the Central Development Working Party (CDWP) and Ecnec. It, however, came as a surprise when “it was communicated that the prime minister Nawaz Sharif, during his recent visit to Karachi on July 10, 2014, accorded approval to fund the project on 50:50 per cent cost sharing between the federal and Sindh governments”.

Under the Ecnec decision, the federal government would provide Rs12.775 billion for the project which will be executed by the Karachi Water & Sewerage Board.

K-IV has a designed capacity of 650 million gallons per day (MGD). Current water demand in Karachi is about 1,000MGD whereas the existing supply is 650 MGD, resulting in a shortfall of 350 MGD and leaving the people at the mercy of the tanker mafia.

The project is to be developed in three stages: 260 MGD in first phase, followed by 260 MGD and 130 MGD in second and third phases, respectively. The scope of work includes acquisition of 1,000 feet right of way (about 10,140 acres) for all three stages, head regulator, pumping stations, treatment plants and reservoir lagoons.

Under the original plan approved by the CDWP in August 2012, “cost of land was to be borne by the Sindh government and the remaining project cost will be co-shared by the federal government, Sindh government and the city district government on 33 per cent each cost-sharing basis”.

Published in Dawn, July 23rd , 2014