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PM informed of $74m kickbacks in Neelum-Jhelum project

The cost of Neelum-Jhelum Hydropower Project has surged from Rs156 billion to Rs274 billion during the last two decades because of alleged incompetence of Wapda, the prime minister has been told.

The Transparency International (TI) has asked the PM to order an inquiry into the award of contract of two Tunnel Boring Machines (TBMs) for the said project in which it is alleged that $74 million have been taken as kickbacks.

Referring to a complaint, the TI-Pakistan has told the PM about the allegation of corruption and loss to the exchequer of Rs7 billion in award of contract by Wapda of two TMB for the Neelum-Jhelum Project. For the past two weeks, the government has not taken any action against this one case of mega corruption, which is only the tip of the iceberg of corruption alleged in the Neelum-Jhelum Project, the letter by the TI to PM says.

The letter has drawn the attention of the prime minister to the following 10 facts:

1. That the irregularity surfaced after the Ministry of Water and Power submitted a revised draft of the project’s PC-1, approved on December 12, 1989, at a total cost of Rs15.23 billion, revised on February 28, 2002 to Rs84.5 billion, to Rs274.8 billion in 2012.

2. That the contract had been awarded on December 19, 2007 to a joint venture of Chinese firms, China Gezhouba Group of Companies (CGGC) and the China Machinery Engineering Company (CMEC), at a cost of Rs90.94 billion – in contravention of the approved Rs84.5 billion cost for the project.

3. That due to the delays, the cost of the project has skyrocketed from Rs84.5 billion to a staggering Rs274.8 billion. The hefty costs associated with the project may result in an exorbitant power generation cost of over Rs10 per unit, against the existing hydroelectric generation cost of 16 paisa per unit.

4. That the burden of the costs arising out of delays and inefficiency is also expected to be transferred to consumers, as the government has decided to arrange 40% of the required funds through a levy on consumed energy imposed by the Government of Pakistan. At present, consumers are paying 10 paisa per unit surcharge, which amounts to Rs6 billion per year.

5. That international consultants never recommended the use of the tunnel boring machines for the Neelum Jhelum hydropower project at any stage.

6. That the Chinese company has refused to operate the high tech tunnel boring machines (TBM) unless the insurance cover of $15 million is arranged by Wapda, as they have refused to accept the responsibility of performance of the TBMs .

7. That no insurance company is ready for insurance of the two TBMs as these were not procured in accordance with the PPRA Rules.

8. That due to the corruption and incompetency of Wapda the cost of project has now increased by four times from Rs84 billion (as per first PC-I) to Rs321.0 billion in 2012.

9. That Wapda, in connivance with M/s Nespak who are official consultants of the Project, (Wapda Chairman is a Director of Nespak), awarded the negotiated contract to M/S Herrenknecht Germany at a cost of US$184 million.

10. That the cost of the boring machines is not more than US$110 million, and US$74 million have been taken as kickback. “As has been reported in the press that the mega corruption occurred in the Neelum Jhelum Project is going to cost the nation power generation at over Rs10 per unit, against the existing hydroelectric generation cost of 16 paisa per unit, TI Pakistan therefore requests the prime minister to order immediate inquiry on the alleged illegal purchase of two TBMs causing alleged loss of Rs7 billion in one procurement only. And also to fix the responsibility and accountability of those who are found guilty, which has caused increase of the project cost from Rs15.23 billion in December 2002 to Rs274.8 billion in 2012, i.e. eighteen times (1,800%). The devaluation of rupee since 2012 is only 62%, as a US $ in 2002 was available for Rs59, and in 2012 it at Rs96,” the letter adds.

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