Total cost of the feasibility report is estimated at $0.381 million or Rs20 million. The KPT project reportedly is pursuant to the policy of the government of Pakistan, which is promoting private sector participation in its water sector by inviting proposals on a build-operate-transfer (BOT) basis. The KPT has allocated a 100-acre parcel of land for the plant. The California Enviro-Management, Inc, a US small company project developer, has received a letter of intent from the KPT to proceed with the project and is said to have teamed with the Burns and McDonnell, a Missouri-based firm, to provide engineering services and to act as overall project manager.
The desalination plant will also include a 15mw power generation plant to supply electricity needed for the process. The feasibility report is expected to be available within six months and then the company would commence work on the actual plant. It will assess the technical, economic and financial feasibility of the construction of a desalination plant to supply potable water to the KPT and the Karachi Water and Sanitation Department for industrial and domestic use. Final decision for implementation of the project shall be made after the feasibility report has been fully assessed by the authorities concerned. With possible foreign investment of over $60 million, the plant on BOT basis for 20 years lease, will provide 25mgd of hygienic and drinking water daily.
With a view to facilitating the processing and implementation of this project, the following suggestions are offered to the KPT.
Feasibility report:
* The KPT may consider sharing project details with other parties interested in desalination plants in Karachi such as the DHA.
* The plant is said to be 25mgd capacity. How would the total cost and cost of one mgd desalinated water work out if the capacity is raised to 50mgd? Perhaps the DHA and the city government may also join the project for the desalinated water to partly meet their requirements of potable water.
* Many parts of Karachi have ground water that is brackish and could also be desalinated, perhaps cheaply than the seawater. It needs to be confirmed if the selected technology would be suitable for desalination of such brackish water and whether the desalinated water so produced will cost-wise be comparable with the desalinated water produced from seawater.
*The feasibility report should also include details about other 25mgd plants based on the same technology and already operating profitably in other parts of the world. Comparative data on capital cost and the cost of one MG desalinated water so produced may also be provided.
*Pakistan has certain manufacturing capability for a large number of engineering goods, pipes, valves, etc. The Karachi Shipyard and Engineering Works may perhaps be able to supply a lot of items for this purpose.
*It is not clear what procurement procedure would be followed for plant purchase. Many sponsors and most of the creditors generally prefer International Competitive Bidding (ICB). The KPT and the sponsors may review the arrangement. Value for money must be assured.
*The laboratory tests may be compared with the standards for drinking water adopted by Pakistan and by the WHO. Before the plant would be finally accepted by the company/the KPT, sea water desalination should yield drinking water of agreed quality or better for the agreed number of days of continued plant operations at the specified capacity.
*Capital cost, including the financing and pre-production cost and the proposed means of finance, may be reviewed carefully. In case it has been assumed that the government will waive the import duties and other charges, the amount may be calculated and provided for unless the government waiver to that effect is already available. Also the feasibility report must have details of tariff determinations, including detailed assumptions for all inputs and outputs.
Suggestion relating to tariff and corporate matters:
* The KPT may consider associating the DHA and the city government on preparation of the feasibility report and it’s vetting. It may participate in the equity of the proposed company and purchase desalinated water produced by the plant.
* The proposed project is said to be a public-private partnership. However, details about the arrangements appear not to have been shared with the public. These arrangements may be negotiated well with the help of experts. From BOT finance basis, it is apparent there shall be long-term arrangements for sale of water to the KPT for about 20 years or so and this tariff may be indexed to inflation or exchange rates, or more such factors. These arrangements, including timely payment for the desalinated water supplied to the KPT, may also require to be formalized through a set of inter-linked agreements.
*The CEM is said to be a small company. It may only be a project promoter. With the submission of feasibility report the real/foreign investors may possibly also join the CEM and then the KPT may have to negotiate the final deal with them. The KPT may keep this aspect in view.
*Time schedule appears tight, both for the preparation of the feasibility report and for the implementation of the project.
*The tariff at which water is sold in bulk to the utility/bulk consumers like the KPT will be the crucial point with big potential for disagreement with the project company supplying water. The KPT may suggest to the government to appoint a regulatory authority for tariff determination or other such purposes.
In the past, Karachi has had many an infrastructure-related feasibility report completed and then shelved, citing lack of resources as the reason for abandoning the projects in majority of cases. One hopes that the desalination plant does not fall in that category and will be completed as planned. We trust this project would be the harbinger of many such other projects for the welfare of the people living in different parts of the country.