In yet another case of funding constraints, the completion of Neelum-Jhelum hydropower project has hit a road block due to skyrocketing costs.Expenditure of the project has reached Rs414 billion and there is no concrete financing of almost half of the total requirement. This has led to the government on Monday deciding to re-engage estranged lenders to complete the troubled mega project.The cost of the project, which is currently under implementation, has soared from the earlier approved Rs274 billion to Rs414 billion – up by Rs140 billion or 51%. The official said the financing gap has been soared to Rs200 billion including Rs100-billion rupee component. The government decided to arrange Rs100 billion from a consortium led by National Bank of Pakistan. He said the term-sheet of the Rs100 billion was being finalised and the federal government will provide sovereign guarantees against the borrowing. Wapda suggested two options of closing the finance gap: invite investors or make the Chinese constructor a partner of the project. The meeting rejected the idea of privatising the project to meet the extra costs but decided to issue Rs100 billion in Sukuk bonds to meet the gap. A Chinese bank is set to lend $576 million and some Middle Eastern lenders have also been approached – but the absence of a sovereign guarantee appears to be an issue.The fact that private investment in the project has been proposed at such a late stage belies belief. Already, it appears that at least four major cost components worth over Rs100 billion have yet to have been added to the project cost. The PML-N government may want us to believe that it is serious about getting the project running, but the matter seems to be about paying lip service rather than coming up with solutions. While the project head has claimed that 72 percent of the physical work on the project is complete, there appears to be little reason to believe this. When the Neelum-Jhelum project was proposed in 2007 the cost was estimated to be Rs130 billion, with half of the finance set to be raised through the controversial Neelum-Jhelum Surcharge. Eight years later, the project is set to cost 2.5 times the original estimate, with no guarantee that the current estimate will be the final one.
pk.shafaqna.com
