1. Basha dam’s feasibility and detailed engineering design was completed in 2008. The estimated cost in US Dollars was $8 billion. That included about $5 billion for civil, electrical and mechanical works; and remaining for miscellaneous items like social and environmental protection, land acquisition and resettlement, consulting services, debt repayment etc. Economic and financial analysis were done at 12% discount rate and project came out to be financially unviable as Financial Internal Rate of Return (FIRR) was 11%. Government requested international development banks to finance the project in 2009. Some donors initially agreed. As a result, the government then (led by Zardari) increased the cost to $11 billion without any proper justification. As time passed and new government came in (led by Nawaz Sharif), they further enhanced the cost to $14 billion, again without any basis. The question is, a project that was financially unviable at $8 billion cost, how would that be viable at $14 billion. Even $8 billion was very high cost than normal making the project to be most expensive storage reservoir with regards to its capacity and size. But that could be accepted, for the time being, as it is in the seismic zone and extra structural measures were required to strengthen the dam structure and power houses, hence high cost.
2. Is Basha going to address Pakistan’s water shortage issue? The feasibility study does not answer provide explicit answer to this question. The feasibility has been done for a hydropower project not a multipurpose storage reservoir, though economic analysis considers economic benefits from agriculture. At the time of feasibility and design, the water availability analysis for consumptive use i.e. irrigated agriculture and other industrial and municipal usage, was ignored.
3. In reality, Basha was to store the same water that is currently stored in Tarbela, and about 80% of that is snow and glacial melt. And Tarbela still had 17 years life left in 2008. So, Pakistan needed a storage reservoir mainly for consumptive use not for power generation like Tarbela and Mangla that are multipurpose reservoirs for consumptive use and flood mitigation, whereas power generation is additional benefit. Operation of both dams is governed by irrigation demand and water is released through penstocks to generate electricity.
4. With Tarbela and Mangla in operation and serving the purposes they were designed for additional storage was required to mainly meet the water shortages for irrigation that go as high as 70% during Rabi season. On the other hand water that is wasted every year to the sea and that also causes flooding, about 40-50 million acre feet (MAF), is rain water that is received during 3-4 months of monsoon. That water enters Indus downstream Tarbela, with major contribution (about 20-30 MAF) from Kabul river that also carries water of Swat and few other small rivers in KPK. Therefore, a reservoir to store part of that water was needed and Kalabagh was the only solution.
5. Why such an expensive and financially unviable dam like Basha should be constructed? The feasibility study says it shall enhance life of Tarbela dam by 32 years and it shall generate 4500 MW electricity. These are the only two benefits. Regarding Tarbela life enhancement, that is grossly overestimated because Tarbela dead storage, that is to be filled in 2025, will already be filled before commissioning of Basha (life of dam is determined by its dead storage capacity, that is provided to store the sediment, Tarbela life is 50 years, and it commissioned in 1976). So the only benefit of Basha will be 4500 MW electricity at a cost of $3.1 million per MW. Whereas, average cost of a hydropower project ranges between 1-2 billion dollars. So, this is going to be the most expensive hydropower project in the World.
6. If Pakistan has to generate hydropower, there are many run-of-the river sites that can generate electricity in less than half the cost of Basha. Four of those are upstream and downstream of Basha including Bunji, Dasu, Thakot and Pattan, that can generate about 15,000 MW with a cost of about $15 billion, Bunji is the biggest hydropower site (7200 MW) and most feasible because it has minimum social and environmental impacts.
6. Pakistan needs dams only for storing water for irrigation because about 40 million acres agricultural land in the Indus Basin Irrigation System (IBIS) is under extreme water stress. IBIS is lifeline of Pakistan because (i) agriculture produced by that is source of livelihood of about 60% of the population of Pakistan, (ii) it ensures food security of entire Pakistan, and (iii) Pakistan’s major exports that are based on cotton, rice and leather products depend on agriculture in IBIS, and (iv) agriculture contributes about a quarter of Pakistan’s GDP. The water shortages are increasing with time because about 80% of the total water in IBIS is received during 3-4 months of monsoon and 20% in remaining 8-9 months. This variability is exacerbating due to climate change, meaning in next 10 years there may be 90-95% water in monsoon and 5-10% in rest of the year. Therefore, Pakistan has no other option but to have large storage reservoirs like Tarbela and Mangla to sustain supplies of IBIS for agriculture. Whereas, at present total storage capacity of Pakistan is 100 days, meaning reservoirs are emptied by January every year.
7. In such a scenario construction of a dam only for power generation could be termed as shear negligence of what we need, I won’t say criminal negligence. Remember Tarbela and Mangla dams were also constructed for storing water for IBIS, electricity is a by-product (bonus).
8. 10 years down the road, the situation has changed. Since Tarbela has left with only 7 years of its life, Basha should be considered alternate of Tarbela. That means if Basha is commissioned by 2025, then the water situation will remain as it is today, and there will be no reduction in water shortages. But if Basha is not constructed then effective storage of the country will reduce to about 45 days, thus further increasing the shortages and enhancing vulnerability to floods.
9. Let us have a look at the cost and financing aspects: Construction cost details are (i) civil works US$ 2.512 billion; and (ii) electrical and mechanical works/equipment $2.515 billion. If we award the contract, say tomorrow, we need about Pak Rs 60 billion annually over 5 years construction period for civil works. For electrical and mechanical equipment/works, we will need about Pak Rs 100 billion each in year 3, 4 and 5 of construction. For civil works, we don’t need foreign exchange as all construction material and labor is locally available and we can pay in PRs for that, meaning there is no issue in starting the construction immediately. We need about $2.2 billion forex for electrical and mechanical equipment/works from year 3 onwards. If construction started in 2019, say from 01 July, we will need on average US$ 750 million (0.75 billion) per years from July 2021 to 30 June 2024 (if construction period is 5 years from 01 July 2019). By July 2021, the forex situation of Pakistan would be much better than today, InshaAllah. We can explore various option if we needed to borrow US$ such as (i) suppliers’ credit; (ii) issuance of bonds; (iii) soft loans from bi-laterals (I won’t recommend multi-laterals because they bring extra cost particularly to meet the social and environmental and gender conditions). As far as financial viability is concerned, since the discount rate is now 7-8% a re-analysis will yield a positive FIRR.
Conclusions: (i) Basha dam’s feasibility study needs to be revised to convert it into a multipurpose storage reservoir as alternate of Tarble, revision of feasibility will not affect construction because there won’t be changes in design of structure of the dam body. (ii) Basha dam site is below snowline, it’s construction is possible to complete in 3 years by working in 3 shifts round the clock and construction contract may be awarded accordingly BUT since there is issue of financing, therefore a five year construction period would be appropriate, construction should be planned to start from 01 July 2019 because all the procurement packages are already designed and ready for bidding, and should be completed by 30 June 2024 (that will give roughly a year time to finalize operation before Tarbela life will be over). And (iii) a campaign is needed to convince political leadership of Sindh for Kalabagh dam because the water that is wasted to sea is only possible to store in Kalabagh and water shortages would be overcome if Kalabagh is constructed. Construction of Kalabagh should be planned from 2025 to 2030.