The Globalization Bulletin Water January 2017 NEWS COVERAGE PERIOD FROM JANUARY 23RD TO JANUARY 29TH 2017 WAPDA CANCELS RS5.4BN CONTRACTS FOR DASU PROJECT Dawn, January 23rd, 2017 Khaleeq Kiani ISLAMABAD: Even before the formal launch of $4.5 billion Dasu hydropower project, the Water and Power Development Authority (Wapda) has terminated two of its key contracts with a Chinese firm, citing ‘fundamental breaches’ of the agreement. Moving swiftly, Wapda has not only encashed the performance guarantees of the two contracts awarded to China Railway First Group (CRFG) in November 2015 — worth Rs5.4bn — but also ordered the contractor to vacate the project area immediately, while calling for fresh tenders to make up for lost time. The World Bank is the major financier of the 4,320MW Dasu project. The project’s terminated contracts include the ‘construction of colony and infrastructure’ worth Rs4.806bn and ‘resettlement of village Choochang and construction of Shatial Museum’ worth Rs572 million. The completion of these two components was considered crucial to the start of construction work at the main project site. CRFG project director Fan Lingang told Dawn: “The termination of the contract is un-contractual, illegal and fiercely unfair.” He claimed it was Wapda’s responsibility to complete the land acquisition process and hand over the required area to the contractor, adding that all Dasu contracts were suffering due to its default. In reply to a set of questions sent to Wapda chairman retired Lt Gen Muzammil Hussain, the authority said it had “provided the partial possession of the site to the contractor M/s CRFG in line with the Contract Discussion Agreement/Conditions of the Contracts”. Asked if the World Bank had indicated that it would take any action, such as loan cancellation or postponement because of project delays, Wapda said: “There is no such indication from the World Bank”. “We are going to approach the local courts to allow us to approach an international court of arbitration to protect our rights because Wapda is not willing to resolve [the issue] amicably,” Mr Fan said, adding: “Arbitration is our right and we have to protect ourselves, not only financially but also our reputation and image.” He maintained that his firm would “complain to the World Bank as well”. Mr Fan said the company had mobilised 30 staffers to the project site, but conceded that practically no work was done because of Wapda’s inability to settle land disputes with locals. “Wapda is the defaulter because it didn’t provide the land. The contractor actually had the right to terminate the contract, but it didn’t.” He claimed that the contract had been terminated without prior legal notice and without being provided the opportunity to rectify any violation, if any, by the contractor. He said Wapda had blamed the CRFG for subletting the contract to a Lahore-based blacklisted company in order to terminate the contract, even though the former was not a legal contract. The authority, however, defended its decision, saying: “The contracts were terminated due to fundamental breaches of the contract by the contractors. In these circumstances, no legal notice was required to be served on the contractor to rectify under the conditions of the contracts.” The Globalization Bulletin Water Mr Fan explained that “a cooperation agreement” was signed with a local firm before the bidding took place as “a matter of comfort”. This, he said, was cancelled when it was pointed out by Wapda and the project consultants, long before the authority terminated the contract. He called Wapda’s encashment of securities and refund of the mobilisation advance a case of fraudulent practice, misrepresentation and use of influence. In response to CRFG’s claims, Wapda maintained that it “issued the notice of termination and lodged the claim for the encashment of the contractors’ advance payment and performance security guarantees to safeguard the mobilisation advance paid to the contractor and to cater other financial losses to Wapda in compliance with the requirements of the conditions of contracts”. To secure itself legally against financial loss and project delays in the case of international arbitration, Wapda said it had lodged the claim for encashment of the contractor’s advance payment and performance security guarantees since it was the only tool available to safeguard Wapda and to avoid financial loss. Wapda has already initiated procurement for these contracts by inviting fresh bids through leading newspapers and official websites of Wapda and the Public Procurement Regulatory Authority, the World Bank and UN Development Business to avoid delays in project implementation. “There will be no delay in project completion if the contractor opts for [international] arbitration,” Wapda said, adding: “Termination will have no adverse impact on the CPEC framework or China-Pakistan relations.” In August last year, the Economic Affairs Division had warned the government that the World Bank could cancel its $1.1bn loan agreement owing to inability of the stakeholders — the federal and Khyber Pakhtunkhwa governments as well as Wapda — to complete land acquisition. The acquisition of about 80,000 kanals of land is a fully funded component of the World Bank. Dasu is one of the top-priority hydropower projects of the government under its 2013 power policy and Vision-2025. The World Bank is providing a $590m loan, along with a $460m credit limit as partial risk guarantee for external commercial financing. Separately, Wapda has contracted about Rs144bn from commercial banks to make available matching financing to meet local expenses. After the completion of the first stage, the project will generate about 33.5 gigawatt hours per day, translating into Rs335m per day (at Rs10 per kilowatt hour). The first phase of the project being executed by Wapda is scheduled for completion by 2019. The second phase to commission another 2,160MW has an expected completion date of 2022. http://www.dawn.com/news/1310195/wapda-cancels-rs54bn-contracts-for-dasu-project FOUR DESALINATION PLANTS LYING IDLE IN GWADAR AMID WATER SHORTAGE Dawn, January 23rd, 2017 Behram Baloch GWADAR: Despite a serious water shortage crisis in Gwadar and adjacent areas, the government has not made four desalination plants functional which have been lying abandoned for seven years. The Globalization Bulletin Water A desalination plant installed in the private sector is working successfully and is selling 100,000 gallons of drinking water to the public health engineering department daily for the supply of water to the people of Gwadar. Sources said that in view of a serious water shortage crisis in Gwadar, Pasni and Jewani in 2008, the provincial government had decided to install four desalination plants in Gwadar district for making sea water drinkable. The installation of plants was planned for solving the water shortage problem of the district on a permanent basis. The task for the installation of the four desalination plants was assigned to the Balochistan Development Authority (BDA) which had begun work on the project shortly. The construction cost of one plant being installed in Gwadar’s industrial area was Rs1 billion. It had a capacity of two million gallons of water per day. The other three plants having capacity of 200,000 gallons of water were installed in Pasni, Jewani and Singhar Housing Scheme with a cost of Rs200 million for each. The sources said the BDA awarded contracts for the plants and work had begun on all of them. Machinery for the plants had been purchased and shifted to the proposed places for installation. However, work on none of the plants could be completed on time. The National Accountability Bureau (NAB) had launched an inquiry into the delay in the installation of machinery in the plants, but to no avail. Despite written assurances by the contractors to complete work on time, no plant has so far been made functional. After Gwadar and adjacent areas were hit by a severe water shortage crisis in 2014, authorities had tried to complete the desalination plant installed in the Gwadar’s industrial area on an emergency basis. Generators were provided and transmission lines were laid. But, the plant could not achieve its full capacity. It is now producing 300,000 to 400,000 gallons of water per day. An official of the Gwadar administration told Dawn that the plant could not be made fully functional due to non- availability of engineers. The three other plants in Pasni, Jewani and Singhar Housing Scheme are still not functional. Officials of the Public Health Engineering Department told Dawn that water crisis was worsening in the Gwadar district. Gwadar town, Pasni, Jewani, Pishkan and many other villages need 8.3 million gallons of water daily while they are being supplied 2.5 million gallons of water from the Mirani dam, which is located in Kech district. http://www.dawn.com/news/1310204/four-desalination-plants-lying-idle-in-gwadar-amid-water-shortage UPGRADING CANALS Dawn, Business & Finance weekly, January 23rd, 2017 Mohammad Hussain Khan A NUMBER of development projects with a focus on the Nara Canal of Sukkur barrage are being carried out by the Sindh Irrigation and Drainage Authority to improve water supply to farmlands though with some hiccups for the growers. Four of the 14 main canals emanating from three provincial barrages have been handed over to the authority (SIDA) and the rest are managed by the Sindh irrigation department. The major works in Nara Canal include: construction of fall structure on upper Nara at RD550; rehabilitation of Ranto Canal; reconstruction of Old Jamrao Canal head The Globalization Bulletin Water regulator; reconstruction of lower Nara Canal head regulator; rehabilitation of Makhi Complex and remodelling of Khipro Canal etc. On-going works in the left bank canals are being executed at a cost of Rs2,859m; Rs2,989m will be spent on the Ghotki Feeder and Rs3578m on the Mithrao Canal.