LAHORE: On April 10, 2025, the Central Development Working Party (CDWP) reviewed the 2nd Revised Project Concept-I (PC-I) of the Dasu Hydropower Project (HPP), which amounts to Rs. 1,737 billion. The CDWP recommended it for consideration by the Executive Committee of the National Economic Council (ECNEC). Clarification on key observations are summarized below with detailed explanation in ensuing paragraphs
The project cost has substantially escalated from Rs. 487 billion to Rs. 1,737 billion. Approximately 85% of this increase is attributed to the depreciation of the Pakistani Rupee (PKR) against the US Dollar—from Rs. 100 in 2014 to Rs. 280 in 2025. The remaining 15% of the cost escalation is due to an increased scope of work, arising from the complex nature of the project. Contracts, including the relocation of the Karakoram Highway (KKH), were awarded under International Competitive Bidding. These contracts are primarily denominated in PKR, with only a small portion payable in foreign exchange. A dedicated team from WAPDA is overseeing the project, led by a full-time Project Director with 25 years of experience in the relevant field. The team includes 5 Chief Engineers, 13 Superintending Engineers, 57 Executive & Assistant Executive Engineers, and over 15 other officials supervising construction activities. Additionally, top-tier international consultants having 130 engineers including 25 to 30 expatriates are engaged in the project. These include Japanese experts from Nippon Koei and specialists from Dolsar, Turkey, who are actively supervising and optimizing project implementation. An International Panel of Experts, comprising specialists in geotechnical engineering, geology, dam design, electro-mechanical, hydrology, seismology and roller-compacted concrete, has also been engaged to review the project’s design and construction.
The Ministry of Water Resources (MoWR) and the Water and Power Development Authority (WAPDA), as the sponsoring and executing agencies respectively, justified the increases in cost and time overruns while addressing queries posed during the CDWP meeting.
According to the approved PC-I, the project was originally scheduled to commence in June 2014, with completion expected in December 2019. However, due to land acquisition issues, the project was actually initiated in January 2020, following a revision of land acquisition rates approved by ECNEC in October 2019.
The project has faced significant delays due to several challenges, including the COVID-19 pandemic, terrorist attacks, flash floods, resettlement issues, and transmission line delays. Security concerns and restrictions on transportation for expatriate workers have also contributed to the delays. Despite these obstacles, WAPDA is actively engaging with stakeholders to meet the revised project deadline, now set for November 2028.
The original PC-I for Dasu HPP (Stage-I), approved by ECNEC in March 2014, was for Rs. 486 billion. It was revised to Rs 511 billion only to the extent of incorporating revised land acquisition rates approved by ECNEC in October 2019. Therefore, the current 2nd revised PC-I submitted in 2025 in CDWP effectively represents the first revision since 2014—after an 11-year interval.
The increase in cost to Rs. 1.73 trillion is primarily due to an extended implementation period caused by the aforementioned delays, particularly the five-year delay in land acquisition related to demands from local affectees for higher land rates. Significant factors contributing to this cost increase include foreign exchange losses (dollar parity increased from Rs. 100 in 2014 to Rs. 280 in 2024, totaling a 45% increase), price escalations to factor-in the inflationary impact due to the prolonged timeline (40.3%), and variation orders (VOs) stemming from land acquisition delays and challenging geological conditions (14.7%). Moreover, the cost of Interest During Construction (IDC) has escalated from Rs. 106 billion to Rs. 479 billion which is again attributable to the prolonged project gestation.
WAPDA has appointed a full-time General Manager as Project Director for the Dasu Hydropower Project to comply with ECNEC’s directive. The appointee is a regular WAPDA employee with significant experience in project and contract management. Additionally, WAPDA has engaged international consultants from a joint venture of M/s Nippon Koei (Japan) and M/s Dolsar (Turkey), led by a Project Manager from Europe with over 38 years of experience, approved by the World Bank. This Project Manager is responsible for overall project management and supervision of construction, environmental, and social activities related to the Dasu Project.
WAPDA manages the financial aspects of its projects and collaborates with various donor agencies, including the World Bank and other banks. It is the only parastatal with a credit rating from S&P, Moody’s, and Fitch, allowing it to raise $500 million from the international capital market without sovereign guarantees. The World Bank approved an additional $1 billion for the DHP-I project on June 10, 2024, linked to IDA credits 7563-PK, 7564-PK, and IBRD Loan 9680-PK. The Bank has requested the EAD to expedite the signing of the agreements to optimize financing costs using concessional funding.
The procurement for road work contracts under a World Bank-financed project was conducted using International Competitive Bidding (ICB), allowing both international and local contractors to participate. Contracts were awarded in local currency (PKR), but a portion of payments to foreign contractors is made in foreign currency as per contract requirements. Significant design changes were made for the relocation of the Karakoram Highway (KKH), shifting from an open-cut design to tunnels and bridges due to land acquisition issues and geological challenges. The redesigned KKH segment aligns with China-Pakistan Economic Corridor (CPEC) standards and was approved by relevant authorities, including the World Bank and WAPDA. The 62 km long relocated KKH will be part of the CPEC and will not be reconstructed by NHA, helping to save government resources.
WAPDA is focused on decarbonizing the energy mix and reducing reliance on imported fuels, currently producing over 32 billion units annually at a tariff of Rs 3.71 per unit, which lowers consumer costs.
Copyright Business Recorder, 2025
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