LAHORE / ISLAMABAD, Sept 28: The Auditor General has asked Wapda to “hold an inquiry and fix responsibility for five-and-half-year delay in implementation of Neelum-Jhelum hydroelectric project and its cost escalation (Rs190 billion) by 225 per cent that show mismanagement in the project”.

A letter by the Auditor General to the Ministry of Water and Power said submission of no reply within four weeks would be taken as “formal acceptance (of responsibility) by the ministry”.

According to the letter on “Increase in cost due to abnormal delay in implementation of a project”, “Neelum-Jhelum hydroelectric project was to be implemented in eight years with effect from July 2002 to June 2010 as per provision of the PC-1.

“The project was approved by the Executive Committee of the National Economic Council (Ecnec) on Feb 28, 2002, at a total cost of Rs84.502 billion. The project was to be implemented in eight years i.e. July 2002 to June 2010. The tenders for this project were invited in May 2005 and scrapped due to non-responsiveness. The tenders were again invited in Nov 2005 which were also declared non-responsive.

“Third time the tenders were invited in July 2006 (Part-I & II) and M/s CGGC-CMEC Consortium was accepted and the project awarded to them at total contract price of Rs90.90 billion on July 7, 2007. The contract agreement was signed on Dec 19, 2007.

“The contractor started the project in Jan 2008. As such the project, which was to be started in July 2002, commenced in Jan 2008 — five-and-half-years late from its original date as provided in PC-1. As per contract agreement the project will be completed in April 2016.

“Due to abnormal delay in the implementation of project, its cost has increased to Rs278.882 billion, as incorporated in the PC-1 under revision. Thus, there is variation in cost of Rs190.380 billion which is 225.29 per cent above the originally approved cost. Due to delay in implementation of project not only the cost has increased but also the benefits to be achieved upon completion of project could not be achieved.

“Five-and-half-year delay in implementation of project and resultant 225.29 per cent increase in cost shows mismanagement and the authority (Wapda) needs to enquire the matter at appropriate level to fix responsibility upon the quarters concerned.”

CONSUMERS MADE TO PAY: Power consumers are paying for the delay in completion of the project in the shape of a surcharge of 10 paisa per unit. The government had estimated that a levy on energy consumption would finance 40 per cent cost of the project. The surcharge generates about Rs5.2 billion a year.

Pakistan had initiated the Neelum-Jhelum project to secure water rights over Neelum River, where India was constructing Kishanganga dam. However, the International Court of Arbitration has stayed construction of the Indian dam on Pakistan’s request.

Lt Gen (retd) Mohammad Zubair, managing director of the project, told a meeting of the National Assembly’s Standing Committee on economic affairs that an additional financing of $525 million was needed. However, he clarified, this amount would be in addition to funding requirements to be met through loans from the Exim Bank of China and the Abu Dhabi Fund.

The project’s estimated cost has gone up to at least Rs274.8 billion from about Rs85 billion in 2002. The managing director said the cost had risen mainly because of a design change after the 2005 earthquake, depreciation of the rupee and delay in execution.

The project was approved on Dec 12, 1989, at a proposed cost of Rs15.23 billion, but the cost was later revised to Rs84.5 billion on Feb 28, 2002.

With the escalating cost of the project, the unit cost of electricity generated through hydroelectricity has been estimated at Rs10 per unit as against the existing 16 paisa per unit from other existing hydel sources.

To date, only 30 per cent of the project has been completed, Lt Gen (retd) Zubair informed the committee.