In yet another U-turn for the ill-fated Diamer Bhasha dam, the Chinese have reportedly backed away from financing the mega hydel project. It seems the financing proved too cumbersome even for Pakistan's all-weather friend.
There have been many inaugurations of the project by different governments but actual work on the ground has been limited. The main hurdle being faced by Bhasha dam is the inability of Pakistan to get a no-objection certificate from India. This has been the primary reason both the World Bank and the Asian Development Bank (ADB) have refrained from financing the project.
However, the Chinese are singing a similar tune this time and are refusing to provide financial assistance for the project because of the boundary dispute between India and Pakistan. India falsely claims the area in Gilgit-Baltistan where the dam is to be built, is disputed territory.
The controversy due to this claim has been damaging for the project to say the least. Lack of financing has meant prolonged delays which have in turn resulted in huge cost escalation. Having an installed capacity of 4500 mega-watts, the project cost has now reached $14 billion! There is a strong probability that the cost will increase even more in the future. Land acquisition of for Bhasha dam has also been undertaken at an exorbitant rate and financing continues to be elusive.
But there have been other factors also. The head of the Water and Power Development Authority (Wapda) recently informed the Public Accounts Committee of unreasonable conditions attached to Chinese financing. Seen as detrimental to Pakistan's interest by Wapda's Chairman, these involved pledging another operational dam and conducting a new feasibility study
Given the acute water crisis in Pakistan, the DB dam is a crucial project for both water storage as well as power generation. If completed the dam will be able to hold 8.1 million acre-feet of water, including 6.4 million acre-feet of live storage.
Despite Chinese refusal to finance the project, the government has decided to go ahead with the construction from its own resources. Wapda will contribute 20 percent, private financial institutions 15 percent and the rest will be funded through the PSDP. In light of the significance of the project, this decision is a step in the right direction.