Key hydropower projects hit by cost escalation

ISLAMABAD: The Ministry of Water Resources has revealed that the cost of major upcoming hydropower projects has increased manifold, primarily due to persistent inflation, sharp currency depreciation, and other structural and administrative factors.

According to the ministry, projects including Diamer Basha Dam (DBD), Mohmand Dam, Dasu Hydropower Project (Stage-I), and Tarbela 5th Extension have witnessed substantial cost escalations driven by rising construction material prices, exchange rate volatility, Interest During Construction (IDC), security expenditures, land acquisition disputes, social challenges, and extensions in project timelines.

The cost of Diamer Basha Dam (dam component) has increased by 134 percent to Rs 1,121,934 million (under approval), compared to its originally approved cost of Rs 479,686 million.

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The Ministry attributed this increase to multiple factors, including the outdated price index of December 2016 used in PC-1, currency depreciation from Rs 105.3 per US dollar to Rs 280 in 2025, revised contract prices for MW-1 and consultancy services, design changes in line with updated ICOLD guidelines, and additional costs such as Thor project colony, external security measures, helicopter services, and the Chilas Safe City Project.

The project timeline has also been extended from February 2029 to December 2030.

Similarly, the cost of Mohmand Dam has surged by 115 percent to Rs 665,743 million from the approved Rs 309,558 million. Key drivers include exchange rate adjustments from Rs 112.068 per dollar to Rs 290, unprecedented price escalation, increased security costs, design variations, higher contractor bid prices, and revised consultancy expenses.

The Dasu Hydropower Project (Stage-I) has experienced a massive 260 percent increase in cost, rising to Rs 1,737,881 million from Rs 486,093 million. The Ministry stated that approximately 90 percent of this increase is due to uncontrollable factors such as foreign exchange losses, price escalation, enhanced security requirements, increased social safeguard costs, and IDC.

Likewise, the cost of Tarbela 5th Extension has escalated by 285 percent to Rs 316,410 million from the approved Rs 82,360 million. The Ministry noted that the original PC-1 was based on 2014 price indices, while the exchange rate has depreciated from Rs 102.543 per dollar to around Rs 281.

Additional cost pressures include revised civil, electro-mechanical (E&M), and transmission contracts, design improvements, and extended timelines.

The Greater Karachi Bulk Water Supply Scheme (K-IV) Phase-I has also recorded a 36 percent increase in cost, mainly due to inflation, delays in implementation, and additional security requirements.

The Ministry emphasized that the project relies heavily on imported components such as pumps, motors, HR coils, valves, mechanical systems, and instrumentation, making it highly sensitive to exchange rate fluctuations—from Rs 178 to Rs 282 per dollar.

Meanwhile, the Auditor General of Pakistan (AGP), in its Audit Report 2024-25, has pointed out financial irregularities amounting to billions of rupees in WAPDA’s hydropower projects, raising concerns over governance and cost management in the sector.

Copyright Business Recorder, 2026