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9/11 is a godsend and its role can be exaggerated to blame for failures like Ghazi Barotha Hydro Project (GBHP) or could be understated like in case of ballooning foreign exchange reserves. The GBHP was due to be completed in 1998 and may have to undergo one or two revisions. It has reportedly been revised once taking the cost up from Rs90 billion to 128 billion by 42 per cent.
In dollar terms the project was estimated to cost $ 2.9 billion with EIRR as high as 22 per cent. What is laughable is Wapda’s claim that ‘despite these setbacks it has managed to contain the overall cost within the original estimates,’ a fact which Wapda is fond of highlighting in order to claim to have brought down the cost of the project. According to the original PC-I dollar was equal to Rs31. Since the PC-1 is always expressed in rupees, evaluation in dollar terms is irrelevant.
Not only that, the time overrun is of the order of four years, so far, that is. Going by the dismal track record, a second revision both in cost and time will have become necessary. To take only one such case of Chashma Hydro Power Project, it involved a cost overrun of 69 per cent and time overrun of four years with a financial rate of return of mere 7.74 per cent. Coming back to Ghazi Barotha its financial rate of return has declined from 17.98 per cent to 9.3 per cent under the revised PC-1.
Not only that, the cost of producing 1 MW electricity will be $ 2 million as against the current estimates of $ 0.6 million. Wapda is spending three times the ordinary cost on producing electricity. Commissioning of the project by 2003 will be timely because by then the excess will have disappeared. Right now Wapda has excess electricity and in its brilliant understanding of economics it has been raising tariff, which discourages purchase of electricity. Instead of blaming the IPPs for the excess, a review of marketing strategy is in order.
Wapda has claimed, according to a report of 05.12.2002 that the first of the five 290 MW units of Ghazi Barotha Hydropower Project (GBHP) will be commissioned by the end of current month. The month came and went without the promised outcome. Responding to press criticism of mismanagement, Wapda set another date i.e. May 2003. Rest of the four units will start functioning by the end of next year, it is claimed. Fourth unit is likely to be commissioned by February 2004. Bid documents and evaluation are still in progress and sources of funding are being trapped.
According to another report, the whole project is promised to be completed by 2004. This too may not happen.
According to yet another report the GBHP has suffered a loss of Rs80 billion, if the delay is limited to two years only. Loss on account of power, which was not made available, and the cost overruns inherent in delays would be of the order of Rs35.4 billion per annum. Rs10 billion are alleged to have been misappropriated. The loss would go much higher if delay of four years is taken into account.
Wapda has tried to justify the delays through the letters to the Editor (Dawn), by saying that ‘due to a lengthy procedure of finalizing loan agreements, and donors insistence that the financial arrangements must be finalized before awarding the contract, the project was delayed by 14 months.’ ‘Purchase of land and the changes made by the government in the import regulation is another factor in the delay’. It has also blamed the delay on non-construction of Kala Bagh, which is costing the country a loss worth millions of dollars every day.
It was during the second stint of Benazir government, that a decision was made to start the project.The ministry of water and power earned the honour of being her first stop for briefing after she took over.The Kala Bagh project was hesitatingly recommended to her. Being a shrewd politician that she is, she did not take the bait for fear of offending three of the four provinces, one of them being her home constituency. She approved GBHP instead. Accordingly PC-I (part-I) - an unusual thing in itself— was submitted in April 1993. It covered the land purchase, relocation and resettlement works, project preparatory works and miscellaneous studies.
Real PC-I (Part-II) was submitted after six months in October, and indicated 64 months, by October 1998, for completion. It was approved in June 1994 for a total cost to the project of Rs90 billion including foreign component of Rs50.5 billion. Power channel and power complex involved an expenditure of Rs32.5 billion. Interest during construction (IDC) was estimated at Rs16.8 billion. It is $331 million already or upwards of $19 billion. Social uplift for the affected is mere Rs267 million.
Sources of foreign funding are as follows:
US$ million
ADB 300.0
OECF/JBIC 286.0
World Bank 350.0
KFW 103.8
ISDP 35.0
EIB 40.5
1105.4
Wapda is to provide almost half the total funding of more than $ 1 billion equivalent. Wapda has not been in compliance with financial covenants.It is in default of financial commitments of 40 per cent in its internal cash generation as well as in debt service coverage ratio. Wapda’s capability of meeting future commitments appears less certain. Financial situation of Wapda remains fragile and it is highly unlikely that it will meet its obligations with regard to the project. Investments for some secondary transmission facilities are held up.An unutilized amount under the bank loan of $18.4 million is reported.
Surprisingly the failure has coincided with the present management, which has never tired over the past four years of claiming accolades for its ghost accomplishments. Whatever has been achieved is through deferrals of investment. Failures would be blamed on IPPs, 9/11, cost of fuel and the failure of government to pay its electricity dues, but never on itself. Long after the project runs into three revisions and enormous cost overruns, this factor would continue to be the excuse box of Wapda. Current liabilities have increased with dues remaining unpaid. The next year is also likely to experience substantial shortfall.
The GBHP involves construction of the world’s largest power channel designed to generate 1450 MGW electricity through five power units of 290 MW each. There would be three main components, a barrage downstream of Tarbela, a power channel with 56,500 cusecs capacity and five units of the powerhouse The channel starts at Ghazi village, 7 km downstream of Tarbela Dam and emerges 52 km later at Barotha at the confluence of rivers Haro and Indus where power units will be installed. It straddles NWFP and Punjab and includes three districts viz. Haripur and Sawabi of NWFP and Attock in Punjab.
This would be run of the river single purpose hydel project. The relatively flat slope of the power channel will permit most of the river drop to be used for power generation. Water will be dropped back into the river after running the turbines. Storages like Kala Bagh that generate so much inter-provincial controversy have been avoided.
The total area required for the project is 5,470 hectares or 85,000 kanals. Only 100 kanals remain to be acquired Total villages affected will be 53 with 20,000 people. 190 families will have to be relocated. Rs45.8 billion is the amount of award of which only Rs448 million remains to be paid. Issues regarding revised cost estimates of awards in 9 villages are causing delays.
The project is being constructed under four civil contracts and 13 mechanical and electrical contracts, and has hopefully entered its final phase. According to official documents the project progress is estimated at 96.3 per cent for contract C-01, 91 per cent for contract C-02 and 90 per cent for contract C-03. But these percentages do not mean much. Efforts are afoot to impound water by 31st May this year.
The new date for completion of the barrage and headworks (C-01) and power channel (C-02) given by Wapda is July 2003. After 9/11 the Italian firm suspended work. The cost estimates of C-01 has increased from $188 million to $213 million and for C-02 from $324 to $351 million.
As for the 3rd contract, viz. power complex and ancillary works (C-03), it was originally estimated to cost $250 million, but is expected to involve an expenditure of $ 274 million. Delays occurred on account of late award of the contract as well as subsequent managerial failures on the part of Wapda. Wapda has a built in mechanism for delay in a contract cell which routinely takes about two years to vet a project. A supplementary agreement was signed in February 2001 and the new completion date is July 2003.
Electro-mechanical works (C-EM01-08) for the purchase of transformers, switchgears and other equipment for power stations have been let out to international firms from Japan, Germany, Austria and China.
First project director for the GBHP was appointed in 1990 and he continued for eight years. Since then three general managers have been appointed, for an average period of one and a half years. The continuity of the first or frequent posting of the subsequent three does not explain the causes of delay, which must lie elsewhere in the over-centralized and incompetent management of Wapda. Failure of coordination is reported to be one of the main reasons for inordinate delays. Panel of experts hesitates to visit the site for security reasons.
500 KV Tarbela-Gatti and 500 KV and Barotha-Rawat transmission lines have also been delayed. Even after all the five units of the project are completed power cannot be supplied unless the transmission lines are complete. According to official reports delays are bound to occur because some tower types have not yet been tested. Large number of insulators and other hardware purchased for Guddu-Jamshoro line, is being transferred to this project. The equipment must be old and rusted. It may be of interest to know that surplus stores are usually purchased to earn commissions.
Delays would be predicated on 9/11. What will not be admitted is abject failure of management, both at the project and corporate levels. Lack of understanding of a complex mega project, general incompetence and reluctance to take timely decisions for a variety of reasons has made it into a sick project. And in the meanwhile we continue to pay interest during construction (IDC), which has gone up to $331 million. Performance has not matched the claims of the management, which has been in place since 1998. One hopes that Ghazi Barotha is in operation by 2006.
