ISLAMABAD, May 2: The $1.5 billion Neelum-Jhelum hydropower project in Azad Kashmir is in the doldrums following the inability of the government and Wapda to award contract for its construction, which may result in Pakistan losing its priority rights over Jhelum waters.

A project of the Water and Power Development Authority, the 969MW project has been hanging in the balance for six years, although it is considered crucial to secure Pakistan’s priority rights over Neelum waters — a tributary of the river Jhelum — threatened by the Indian move to use its waters for power generation and diversion.

Sources told Dawn Prime Minister Shaukat Aziz had taken up the project with the Chinese leadership during his recent visit and the complexities relating to Chinese bidders, but the outcome was not encouraging. The prime minister later told reporters that the Neelum-Jhelum project was not discussed with China.

Adviser to the Prime Minister on Finance Dr Salman Shah separately told Dawn that financing for the project was available in the form of offers from Qatar and the Middle East, but Wapda had been asked to take a decision on the bidder as well as project structure.

He confirmed that the lowest bidder had not been able to arrange credit for the project. He, however, declined to comment on the second lowest bid, saying the government would arrange financing when Wapda took a decision on technical issues.

The bidding for the project was held about a year ago. The contract could not be signed with the lowest bidder that quoted $1.3 billion price for the project because it failed to arrange required buyer’s credit -– a pre-condition under the bidding.As a result, discussions were held with the second lowest bidder that offered $1.8 billion along with buyer’s credit of about $700 million. However, the talks failed when Wapda found that the manufacturer of the plan and machinery for both the bidders quoted incredibly higher rates in case of the second bidder.