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Govt clears high cost Jamshoro power project

The federal government has, in principle, approved the multi-billion-dollar Jamshoro Power Generation project despite the inflated cost and incomplete environment and feasibility studies while leaving the job of fixing the problems to bureaucrats.

The Central Development Working Party – responsible for initiating the process of approval for mega projects – gave the go-ahead to the project for securing a $900 million loan that the executive board of the Asian Development Bank would consider for approval on Wednesday.

The power project was approved at an estimated cost of Rs220 billion, according to a handout issued by the Ministry of Planning. It included foreign exchange component of Rs165.2 billion.

The meeting was chaired by Minister for Planning, Development and Reforms Ahsan Iqbal, who was also the deputy chairman of Planning Commission. The government has initiated the process to convert and run the power plant on imported coal, having power generation capacity of 1,200 megawatts.

Before approving the loan, the ADB had pressed Pakistan to agree that it will utilise 80% imported bituminous coal and 20% domestic lignite in the project. The project is expected to improve the energy mix with reduced consumption of expensive imported furnace oil and increased use of less expensive high quality coal.

According to sources, the CDWP found serious flaws in the project’s PC-I – the document that carries important details including financial viability, cost estimates and engineering details. The meeting noted that the Ministry of Water and Power had overestimated some of the costs and feasibility and environment assessment studies were also faulty.

They added the water and power ministry had worked out a far higher power tariff compared to the upfront tariff approved by the National Electric Power Regulatory Authority (Nepra), in an attempt to prove that the project was financially viable.

The ministry also enlisted the cost of buying about half a dozen locomotives and 50 to 60 bogies for transporting coal to the project site instead of acquiring cargo services of state-run Pakistan Railways.

However, despite the flaws, the CDWP cleared the project and constituted an inter-ministerial committee of bureaucrats to fine-tune the documents.

When approached, spokesman for the planning ministry Asif Sheikh confirmed flaws in the project cost estimates. He said a committee comprising officials from the ministries of water and power, planning, ports and shipping, railways as well as Economic Affairs Division had been constituted to review the project cost and submit the PC-I again for final approval.

He said the CDWP directed the water and power ministry not to go for procurement of locomotives and bogies and instead strike a deal with the Pakistan Railways. He said the project tariff was also higher than Nepra’s tariff and the CDWP directed that it should be brought on a par with Nepra’s tariff.

“Owing to upcoming ADB board meeting on October 30, the government had to clear the project for qualifying for the loan,” said Sheikh.

Overall, the CDWP cleared seven development projects costing Rs245 billion. It approved Prime Minister’s Youth Skill Development Programme worth Rs800 million and Prime Minister’s programme for provision of laptops to talented students at an estimated cost of Rs23.5 billion, according to the handout.

Under this scheme, 150,000 laptops would be distributed annually among students of public sector universities securing over 60% marks, it added. The scheme will continue for at least five years.

The project was cleared despite some flaws in its design. Instead of following the Punjab government’s model of purchasing laptops from a vendor and handing them over to students, the Higher Education Commission proposed to set up a project monitoring unit.

The CDWP asked the HEC to follow the Punjab model but cleared the project without reassessing its fresh cost, according to sources.

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