The unending cost escalation — 405 per cent (from Rs16.92 billion to Rs85.57bn) as per the unapproved third revised project cost (PC-I), as well as the prolonged delay in the Nai Gaj dam project’s completion, perhaps merit prime ministerial-level intervention to fix responsibility for why a project of vital importance remains incomplete even after 13 years.

Nai Gaj dam is primarily a rainwater harvesting project being built in the Kachho area, a hilly terrain of Dadu district.

Another potential loss is socio-economic — fisheries, farm benefits, etc — were assessed at Rs3.5bn per annum in 2012 when it was launched. All these costs have since increased multiple times.

The project has missed another completion date of June 2025 as per the second revised PC-I. Project officials said that the project is now expected to be completed on Jun 30, 2027, if work continues without a break. PC-I’s third revised cost of Rs85.57 bn — submitted to the government in Jan 2025 — is yet to be approved by the Executive Committee of the National Economic Council (Ecnec).

The situation warrants attention to determine how the project’s cost has increased from Rs16bn to Rs85bn, despite less than 50pc physical progress

One should not rule out even a fourth cost revision, considering the pace of work coupled with fiscal space availability in the federal government’s Public Sector Development Programme (PSDP). The project has been facing cost overruns due to multiple factors — funding, the contractor’s fake performance guarantee, and finally, the suspension of work by the contractor because the dues were not cleared.

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Financially, it has achieved 49.45pc progress with Public Sector Development Programme (PSDP) funds utilisation of Rs23.23bn as per the presentation given to the upper house of parliament’s committee on water resources recently.

Under PSDP, Rs3.04bn were released for FY25 out of the Rs5bn allocation. The project was approved by PPP’s federal government, formed in 2008, similar to the Darawat Dam, which was completed a few years ago. Thirteen years down the road, 48.30pc physical progress has been achieved so far in the Nai Gaj dam. The project’s progress trajectory indicates it still has a long way to go before reaching the completion mark.

Allocation for FY26 stood at Rs500 million against the demand of Rs19.89bn. Since October 2024, no releases have been made till August this year. When the project commenced at a cost of Rs16.92bn on Apr 25, 2012, its original completion date was April 24,2015, as per PC-I. But the timeline was extended till Jun 17, 2018.

The project faced glitches of different nature, including termination of contract due to submission of fake performance guarantee and numerous litigations. “When performance guarantee was verified — upon expiry of initial three-year completion period of April 2015 — the document in question was found to be fake, thus contract had to be terminated on Aug 29, 2018, under the relevant contract’s clause,” said an official while requesting anonymity.

The contractor challenged termination in the Sindh High Court (SHC), which directed Wapda to initiate an arbitration process in February 2019 while setting aside the termination on the grounds of a fake bank guarantee. Public Accounts Committee (PAC) also remained seized of bank guarantee issues.

“Following an arbitral award agreed between Wapda and contractor in the light of court’s order a memorandum of understanding (MoU) was signed in 2021, envisaging that “cost escalation” will be allowed as per inflation recorded till 2018 and the project will be completed by Oct 2024. Escalation was to remain frozen for next three years as per MoU,” informed a project official.

Subsequently, a second revised PC-I was approved by Ecnec, which fixed the project completion date of Jun 30, 2025. Wapda, meanwhile, filed an appeal against SHC 2019 on the contract’s termination order before the apex court, where it was pending adjudication.

Wapda simultaneously questioned the contractor’s ‘fake bank guarantee issue’ in the Banking Court. Works in the project had restarted on Oct 28, 2021, as a second revised PC-I of Rs46.98bn was approved by Ecnec, setting the completion deadline of Jun 30, 2025. This timeline has been missed.

Contractor, on the other hand, filed another case in SHC in 2023 to seek ‘unfreezing of escalation cost’ as agreed under the MoU and got an order in his favour from SHC on Oct 6, 2023, ordering Wapda to replace the non-escalation clause with price escalation as per Pakistan Engineering Council (PEC) guidelines. Wapda, too, impugned the Oct 2023 SHC order in the Supreme Court, where it was still pending for hearing.

The contractor has already suspended work by serving a notice to Wapda in February 2025, requiring it to pay Rs4.2bn liabilities along with delay payment charges as per the contract’s clause before he resumes work. He filed a case before the SHC, which asked Wapda on May 27, 2025, to clear the pending dues of the contractor, amounting to certified liabilities. The work on the project has not yet resumed due to the lack of liabilities’ clearance.

“Contractors are also working on projects like Bhasha, Dasu and Mohmand, but no such suspension of work is seen there, although liability issues occur there too, but they get their payment along with delay payment charges as per the contract’s clauses. These contractors have fiscal space available with them,” explained an official. He added liabilities in the Nai Gaj case stood at close to Rs3bn while PSDP allocations for FY26 are Rs500m.

A ministerial-level team of officials was also looking into ‘cost and time overruns’ of the project as per the routine practice of any such project under the Planning Commission’s development manual. This process has not yet been completed. However, the situation warrants the prime minister’s attention, particularly regarding the Nai Gaj dam, to determine how the project’s cost has increased from Rs16bn to Rs85bn, despite less than 50pc physical progress.

Published in Dawn, The Business and Finance Weekly, August 11th, 2025