PROJECT
Dasu Hydropower is a project located about 240 kilometres upstream on River Indus. It is considered a project of national significance with a production capacity of 2,160MW in Stage I.
Its consultants comprising of Nippon Koei of Japan and Dolsar Engineering of Turkey, were engaged by Water and Power Development Authority (Wapda) to prepare detailed design and construction supervision. Stage-1 of the project was approved by ECNEC in 2014 at Rs486 billion. The World Bank agreed to provide financing of $588.4 million IDA Credit and $460 million Partial Credit Guarantee (PCG). The remaining will be raised by Wapda against sovereign guarantees.
The Dasu Project comprises of four components: (1) Preparatory works (2) Main works - these account for $2.2 billion, 90 percent of which is to be arranged by Wapda from commercial banks - (3) E&M works at $600 million, to be arranged by the Export Credit Agency (ECA) (4) 765kV transmission line.
Wapda awarded the preparatory works in 2015. Progress for part-1 currently stands at four percent only, due to a delay in the land acquisition by the stakeholders; the federal and Khyber Pakhtunkhwa governments, and Wapda. According to a senior official of the Economic Affairs Division, the acquisition of about 80,000 kanals is a fully-funded component of the World Bank, with the precondition that it would be completed by October 31, 2016.
However, disputes have been lingering on for more than 20 months; non-payment of compensation to land owners has led to anxiety and dissatisfaction. They have now started protesting and have forcibly stopped construction on many occasions.
“Due to local disturbances arising from land acquisition issues, all the mobilised contractors for preparatory works have suspended their work; it needs a minimum of two more years to complete if the dispute is resolved now,” says a senior Wapda official who requested anonymity.
The main works - which are scheduled to be initiated after the preparatory works are completed - have been marred by controversy since the beginning. In August 2014, Wapda’s then Project Director Haji Farooq, issued a document inviting applications for pre-qualification from interested parties for the construction of main works, wherein the applicant was required to arrange financing for the contracts. International road shows were conducted in China, Dubai, Turkey, and Pakistan. Contractors who had shown interest to participate and had the ability to bring $1.9 billion in financing as required by Wapda (published in the Wapda brochure), attended the conferences.
After two years of hectic efforts to generate the interest of the international contractors and lenders, in February 2016, the same Project Director invited the shortlisted bidders to participate in the bidding process but suddenly dropped the required financing amount to $350 million, a surprise 80 percent reduction. In April 2016, with only one month left for bid submission, Haji Farooq issued an addendum, this time deleting the $350 million financing requirement altogether.
Due to the deletion for financing requirement, many contractors were not able to participate despite meeting the eventual criteria. A few renowned European contractors, suspicious and dismayed by this untimely change, complained to Wapda, all but in vain.
“We have been pursuing the Dasu project for many years now and have been very keen to participate,” a European regional head of a company explained. “But due to the prerequisite of bringing in billions in financing, our BOD decided not to bid. Had we known that this requirement would have been abolished, we would have participated with a comprehensive and competitive proposal.”
Rather than addressing or even responding to the grievances raised by some of the best international contractors, the then project director railroaded all international norms of procurement and dictated a decision to proceed in extreme haste. Not having qualified companies participating due to last minute changes, greatly affected the competition.
“The problems in Dasu, including land acquisition and procurement, can be properly resolved in a professional and comfortable manner. However, the project in charge handled everything in haste and intended to award the $2 billion contract before his retirement from this office," said a senior Wapda officer on condition of anonymity. “This expediency is illogical and is at the cost of transparency, justice and fairness in the procurement process.”
This approach also resulted in the bidding process being challenged in court. In July 2016, a Chinese firm qualified by Wapda but later disqualified, decided to file a case against the disqualification in the Supreme Court of Pakistan. “The disqualification of the company on account of dictated exercise of powers qualified as an arbitrary exercise of executive authority and is therefore liable to be set aside on this ground alone,” the petitioner argued in the Supreme Court.
Another senior person from Dasu HPP’s consultant has suggested to Wapda to refresh the bidding process to avoid any doubt and controversy, citing the harm it may cause to investor confidence in Pakistan if this mega project is in dispute. Moreover, the urgency in Wapda’s conduct and process is unfathomable as the main works will not commence any time in the foreseeable future. In fact, awarding it at this stage will eventually cost the tax-payers in terms of contractor claims as a result of the delay. However, the suggestion was sidelined primarily under pressure from the World Bank. “At the heart of this mess is the unusual influence of World bank for this project. Against norms, they have been pressurising the project office directly, often resulting in arbitrary and baseless steps. They have not only damaged the project but also made a mockery of Wapda rules and procedures,” revealed a senior official.
Similar expediency was exercised by the previous regime for initiating Kheyal Khwar (122MW) hydropower project. The contractor was awarded notice of commencement almost two years late due to problems with land acquisition. Now it is learnt that the contractor has accrued claims due to this delay and is not willing to commence work till this cost of delay is paid.
“Wapda needs to learn lessons from its previous projects. The cost of Neelum-Jhelum has increased three-fold and continues to increase. The most important reason for cost escalation is our poor planning right at the beginning.”
While the Neelum-Jhelum saga is yet to reach its logical conclusion, a crisis over the Dasu project, which is of a much larger scale, is already in the making.
The writer is a communication practitioner
