PAKISTAN’S TROUBLE-PLAGUED 1450MW Ghazi Barotha run-of-river project is set to be at the centre of a World Bank appraisal of the country’s power sector privatisation process.
The Bank has suggested that Pakistan’s Water and Power Develop-ment Authority (WAPDA) would not need to increase wholesale tariffs beyond fiscal 2003 if Ghazi Barotha can be commissioned by then. But the project, in common with the reform process as a whole, has already suffered serious delays and WAPDA is trying to steer the process in its favour.
At immediate stake is a further US$350M loan from the Bank to support reform. Chances that it will be granted under present conditions are ‘bleak’, according to sources within WAPDA.
On paper, the project is almost ideal. It was conceived in 1987 to use regulated flows from the Tarbela dam across the Indus river, only 7km upstream of its intake at Ghazi, to provide assured year-round, low cost, low impact power. Over half its initial US$2.25B cost was financed in 1996 as development assistance.
The Bank and Japan’s Overseas Economic Co-operation Fund – now the Japan Bank for International Co-operation (JBIC) – each put up US$350M. The Asian Development Bank (ADB) added US$300M with Germany’s Kreditanstalt fur Wiederaufbau (KfW) contributing US$150M. Kuwaiti and other sources have also contributed. Most of these funds carried six-year grace periods so the project could be completed by the end of 2001 before repayments would fall due.
In addition, the Bank and the Pakistani government jointly set up an NGO, the Ghazi Barotha Taraqiati Idara (GBI), to oversee resettlement of the 900 people who would be displaced. Most of these lived along the line of the 52km concrete-lined intake channel between Ghazi and Barotha that will create the project’s 69m head at Barotha.
But then came trouble. Regional and domestic financial conditions – particularly Pakistan’s extraordinarily weak public finances – prompted International Monetary Fund (IMF) intervention that starved the project of local funds. This caused construction delays and consequent cost overruns. Project completion is now scheduled for June 2003, 18 months late. Albeit to placate the Bank, the first of its five 290MW Francis turbines will now be commissioned on 14 August 2002. The final total cost may be as high as US$2.8B.
An important component of both the delays and cost overruns has been disputes and alleged corruption over land acquisition and compensation.
Six mostly village-level land valuation committee (LVC) members were arrested by the Northwest Frontier Province Regional Accountability Bureau (RAB) on 3 August 2001 on charges of illegally inflating land prices. RAB claims eight people (the other two are still at large) have creamed US$ 21.5M from land purchases for the project. It says the Land Acquisition Act ‘clearly states that the previous 1-2 year average sales price should form the basis’ for acquisition payments. Hence original land purchase cost projections were US$28.2M.
But this figure eventually rose ‘manifold with connivance of land acquisition officials, the GBI and land owners’ to US$117.6M, RAB says. The present expected cost is US$78.4M.
All these issues, plus nationally endemic non-payment of electricity bills, have forced project owner WAPDA to issue nominally one-year bonds to finance its half of the local cost component (the other half is carried by the central government).
Last year it floated US$95M worth of bonds that have already been rolled over on reaching maturity. It has also just floated a further US$95M to meet this year’s costs and must raise another US$190M to bring the project to completion by June 2003.
WAPDA desperately needs cash. It is therefore trying to steer the IMF/World Bank/ADB power sector reforms such that it retains most of the value of the 12 provincial power generation and distribution subsidiaries that are to be established. WAPDA would like to set them up financed 70:30 debt:equity, but its existing ratio is 50:50.
It also wants to keep raising tariffs. A 28.8% increase by July 2001 (as opposed to the 19% WAPDA told the Bank it needed) was rejected by the recently established National Electric Power Regulatory Authority. Hence the Bank’s mild observation that Ghazi Barotha’s low cost power would obviate further tariff increases.