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Cut power subsidies and invest in Diamer Bhasha Dam, says ADB

ISLAMABAD: The Asian Development Bank (ADB) has asked Pakistan that it must reduce power subsidies to spare money for financing the mega Diamer Bhasha dam amid fears that growing cost of the project may lead to its eventual cancellation.

According to sources in the Ministry of Water and Power, ADB has expressed fears that if delayed further Diamer Bhasha dam may not remain feasible as its cost is rising continuously.

ADB has conveyed that power subsidies should be cut down and diverted to the $13 billion dam, which will have the capacity to produce 4,500 megawatts of electricity.

The bank has also supported a proposal of mortgaging power turbines of Tarbela, Mangla and Ghazi Barotha projects for raising funds for the dam. “The United States has endorsed this plan,” a source said.

In its nearly five-year tenure, the government has doled out Rs1.4 trillion in power subsidies, annoying international donors. Only in the first five months (July-November) of the current financial year, Rs170 billion has been spent on subsidies.

It has not been easy for the government to generate funds for Diamer Bhasha as multilateral donors are reluctant and stress that Pakistan must seek a no-objection certificate (NOC) from India before going ahead with the project. Delhi has opposed the dam on the grounds that the project site is in a disputed territory and it can have environmental impact.Rs170b

However, the US has agreed to provide $200 million for the dam and government officials hope that Washington will serve as an encouragement for other donors.

According to an official of the water and power ministry, ADB has asked Pakistan to conduct financial and environmental risk analysis of the dam. The government must review resettlement plan for people being displaced by the project, the bank said.

The government is also looking at other sources of financing including countries like China, Japan and Russia, which are being pursued to get assistance for the dam.A power surchage

China was already funding Neelum Jhelum hydropower project in Azad Jammu and Kashmir, the official said.

The government is negotiating with the donors including the World Bank and Islamic Development Bank, but they seem more interested in financing 4,320MW Dasu hydropower project instead of Diamer Bhasha.

This project is situated 7km upstream of Dasu village on Indus River, 74km downstream of Diamer Bhasha dam and 350km from Islamabad. The project site is in Kohistan district of Khyber-Pakhtunkhwa.

“A power surcharge is also under consideration in an attempt to create a steady stream of funds for Diamer Bhasha dam,” the ministry official said, adding this way the government would be able to collect about Rs6 billion per year with a 10 paisa per unit surcharge on power consumers.

http://tribune.com.pk/story/485604/cut-power-subsidies-and-invest-in-diamer-bhasha-dam-says-adb/