ISLAMABAD: With the United States seeking a gradual increase in the water tariff to recover the full cost of its delivery both for irrigation and urban uses as part of its proposed financing for the $12 billion Diamer-Bhasha dam, the World Bank has come under severe criticism from international development lenders for not funding this ‘highest priority project’.

Informed sources told Dawn on Monday that the forthcoming strategic dialogue between the United States and Pakistan ahead of a fresh round of discussions of the water sector task force (WSTF) of the so-called Friends of Democratic Pakistan (FoDP) would focus on Islamabad’s precise plans for water sector reforms and the World Bank’s lack of interest in the Diamer-Bhasha dam project. The two events are expected early next month.

The dam has been described by both Islamabad and Washington as the highest priority project. The two sides generally agree that the project with 7 million acre feet water storage and 4,500MW power generation capacity required support from external partners – both public and private – and hence the support of the FoDP member countries was critical.

The FoDP support is likely to lead to direct bilateral financing by member states and also help Pakistan obtain financing from multilateral institutions, including the Asian Development Bank (ADB) and the World Bank.

While the ADB has made initial commitments to extend between $2-4 billion for the project, the unwillingness of the World Bank has worried many bilateral lenders given the fact that the World Bank’s Operational Policy on disputed territories (OP 7.60) does not require a ‘no objection certificate’ from other party – India in this case as the dam site is in Gilgit-Baltistan.

According to some bilateral lenders, the operational policy of the WB required that in a case like Bhasha dam either Pakistan or the World Bank should ask the government of India to say in writing if it has any objection to the project on the grounds that such a project would prejudice the outcome of the territorial dispute.

If India raises objections in writing, the World Bank management should consider them and make an assessment about the merit of such objections. In proceeding with such projects, the World Bank documents state that it does not intend to make any judgment on the legal or other status of territories concerned or to prejudice the final determination of the parties’ claims.

On the other hand, it is generally believed that India has informally communicated its objection to Bhasha dam to the World Bank and for this reason the bank has not engaged itself in the project. Friendly lenders believe that if that is the case then the “bank management has not followed its operational policy on disputed territories”, an issue that needs to be addressed by US and other leading nations.

Interestingly, the World Bank helped India and Pakistan to sign a landmark Indus Waters Treaty in 1960 as part of the Indus Basin Development Plan which required Pakistan to build new major dams every 10 years but none has been built in 50 years.

The World Bank stance has also been found at fault in view of the fact that the 1960 treaty gives Pakistan the right to projects concerning waters of the Indus River. It may be mentioned that India helped finance the construction of the Mangla dam as part of ‘replacement works’ although the dam is located in disputed territory – Azad Kashmir.

Also, India has constructed and continues to construct a large number of dams in the disputed territory of Jammu and Kashmir and has not sought, nor received, non-objections from Pakistan. In fact, India has formally urged Pakistan to build storage dams on the Indus.

Informed sources said the US was supportive of the project, along with project financing, because of the fact that the dam would have enormous benefits – from energy, food and irrigation security to poverty reduction and environmental contribution and flood protection. It agrees that the Colorado and Murry Darling could store 1000 days of average river flows whereas Pakistan’s Indus project that can store only 30 days of flows and the Three Gorges Dam in China reduces the peak of the 50-year flood by 40 per cent against Tarbela’s negligible flood impact.

But before making any formal financial commitment, the US wants Pakistan to commit prioritising investments in on-farm water management in provinces and institutionalise full cost recovery of water distribution for better service delivery through fresh contracts with consumers – provinces, municipalities, farmer associations – for gradual increase of tariffs to sustain maintenance of water infrastructure.