Money matters: Govt slashes cost of five energy projects, saves Rs131 billion

ISLAMABAD: The federal government has saved Rs131 billion by rationalising the cost estimates of five strategically important energy projects, slashing them down to Rs793 billion – lower by almost one-third compared to the proposed budget. According to documents, the proposed cost of these five projects that include the 1,200 megawatts Jamshoro power plant and 2,160MW Dasu hydro power project was Rs924.3 billion. The savings are almost one-fourth of this year’s original federal development budget and over 5% of this year’s original tax target of Rs2.475 trillion. Already, four out of these five projects have been approved by the Executive Committee of National Economic Council – the highest project approval authority, at rationalised cost while the fifth, land acquisition for Diamer-Bhasha Dam is pending with the ECNEC for approval. The budgets were rationalised during the scrutiny of the PC-Is – the detailed project documents, by the ministry of planning, development and reforms. However, it is not yet clear whether the government will take any action against those who prepared the PC-1s at exorbitant rates.

Over the years, the projects have been approved at increased prices, sometimes to make money in procurements but often due to incompetency of the evaluators who failed to pick price differentials. The flaws in the PC-I of the Jamshoro project had been highlighted by the planning ministry at central development working party level. It had noted that the water and power ministry had overestimated some of the costs, including feasibility and environment assessment studies that were projected at an inflated rate. The maximum saving has been made in 1,200MW Jamshoro power project, as its overall cost has been reduced to Rs177.2 billion, against the proposed cost of Rs254.8 billion, saving up to Rs77.6 billion or 30.4% against the original cost. Out of Rs77 billion savings in the project, Rs42.1 billion were on account of lowering cost estimates of super critical boiler coal-fired steam power plants. A saving of Rs8.5 billion was worked out on account of handling of fuel and cooling systems, Rs7.8 billion on account of administration and authority overheads and Rs5.1 billion on erection charges. “The savings were worked out by minutely going through each component of the PC-Is of all the projects and comparing with prevailing rates,” said Zamir, the coordinator of energy security, who has also been appointed as the new spokesman of the planning ministry. Likewise, the government also saved Rs28.4 billion by rationalising the cost of Dasu hydro power project. Against the proposed price of Rs514.5 billion, the revised estimated completion cost is Rs486.1 billion. The federal government has also rationalised the cost of Diamer-Bhasha Dam land acquisition by Rs18.4 billion or 15.3%, cutting it down to Rs101.6 billion from Rs120 billion. The cost of Harpo hydropower project has been lowered to Rs9.5 billion from Rs13 billion, which would save Rs3.4 billion or over one-fourth of the total cost. Similarly, the cost of ADB-funded distribution and transmission network project has been rationalised to Rs18.5 billion, saving up to Rs4.2 billion or 18% against the proposed price. Published in The Express Tribune, May 7th, 2014.