CHITRAL: The 69MW Lawi hydropower project near Drosh town in Lower Chitral remains far behind the completion deadline over cost escalations caused by devaluation of Pakistan rupee against the US dollar.

When the agreement was signed between the company and the Pakhtunkhwa Energy Development Organisation (Pedo) of the government of Khyber Pakhtunkhwa in October 2016, an American dollar was equivalent to Rs100 and the payment was to be made in local currency.

The construction company is said to be in great distress financially in the aftermath of the massive devaluation of Pakistani currency, inflicting a huge loss on it.

According to knowledgeable sources, about 35 per cent work has been accomplished against the target of 65 per cent by January this year, while the project is to be complete in November 2021.

The company is said to have landed in an embarrassing situation as it can neither back out of the agreement because it will have the work and performance securities amounting to billions of rupees forfeited, nor can it continue work at the required pace as this way it will suffer further losses due to cost escalation.

Cost escalation cited main reason for delay

The sources said as per the agreement, the company cannot make claims to any escalation in the rates of construction material.

The power project worth Rs16 billion entails a tunnel of 14kms, which will divert water from a stream in Shishi Koh valley. The power station will be constructed at the foothills of Lawi village along the Drosh-Chitral Road.

Presently, the company is employing 480 skilled and unskilled workers, out of them 130 are foreigners whose salaries have been paid till January, but payments to the local petty contractors are said to have long been pending.

An employee of the company said although the firm was in loss it had been clearing the dues of employees regularly. He said there was also no issue as far as payment of dues to the company by Pedo was concerned.

Another source in the project feared that the work on the hydropower station would finally come to a halt and its cost would increase manifold because the initial estimates were based on market rates prevalent four years ago.

He said if the Chinese company backed out of the contract, then the remaining work would be contracted out as per the existing composite scheduled rates which had increased by more than 60 per cent over the years.

Project director Niamat Khan confirmed that the work was going on at snail’s pace, thus slimming the chances of its completion by the stipulated time. He said due to the devaluation of Pakistani currency, the construction company was in loss, but it was also bound by the agreement to carry on their work without requesting for raise in the ‘item rates’.

“Rise in rates of dollars is a common phenomenon in the international contracts as a company always includes the impending fall in the value of local currency and so does the Chinese company,” he noted.

The project director said revision in the rates was, however, beyond the scope and authority of Pedo, which could be done only at the highest level through the Chinese embassy.

When asked why Pedo had failed to get the work accelerated, he said the construction company had been served with a number of notices in that regard during the last two years, but to no avail.

Published in Dawn, January 6th, 2020