Cost of under-construction Mohmand Dam increases to 666 billion rupees

According to officials, major reason for increase in cost is devaluation of rupee and changes in exchange rate against dollar

Islamabad: Cost of under-construction Mohmand Dam Hydropower Project in Pakistan has been increased to 666 billion rupees after 115 percent increase during last 8 years.

According to officials, major reason for increase in cost is devaluation of rupee and changes in exchange rate against dollar, while changes in design, 2022 floods and security issues have also affected cost and completion period of project.

According to government officials, Water and Power Development Authority (WAPDA) has proposed to fix revised cost of project at 666 billion rupees. This matter was presented in meeting of Central Development Working Party this week, however decision could not be taken due to shortage of time.

CDWP is initial forum for approval process of mega projects, after which matter is sent to Executive Committee of National Economic Council (ECNEC) for final approval of project, cost of dam was approved at 310 billion rupees in April 2018 and target was set to complete it by September 2025. However, now increase of 356 billion rupees in cost has been proposed.

Project administration told Planning Commission that basic reasons for increase in cost and delay include devaluation of rupee against dollar, changes in design, floods and security-related difficulties.

According to Planning Commission officials, WAPDA said that about 51 percent of increase in total cost of project is due to devaluation of rupee against dollar. Project includes local and foreign currency expenditures, therefore changes in exchange rate have increased value of foreign expenditures in rupees.

Planning Commission has also sought details of payments under dollar-denominated contracts from WAPDA and explanation of impact of change in exchange rate on cost of project. According to Commission, it is not enough to merely convert amount of contracts fixed in foreign currency according to current exchange rate, but it is necessary to review terms of contracts, actual liabilities of payments and clauses related to exchange rate.

According to documents, construction cost of dam in revised estimate has been proposed at 267 billion rupees, which is 153 billion rupees or 134 percent more than initial estimate. Similarly, cost of power generation component has increased to 399 billion rupees, in which there has been increase of 204 billion rupees or 105 percent.

According to documents, total 275 billion rupees had been spent on project till last month, while construction work was about 57 percent complete. Construction of Mohmand Dam is joint venture of Chinese company China Gezhouba Group Company Limited and Pakistan's Descon Engineering Limited.

According to administration, in 2022 severe flood in Swat River damaged tunnels built to divert water, due to which construction work remained affected for long time. Planning Commission has termed delay and increase in expenditures in project as concerning and has recommended third-party examination of financial and physical progress.

Commission has also recommended preparing revised financial plan, completion of Mohmand Dam is expected to increase Pakistan's total water storage capacity by 1.29 million acre feet.