The facts about Nandipur Power Project
What was aimed to be the government’s stepping stone in tackling the energy woes has turned into a nightmare. The mystery about Nandipur Power Project has been unravelled with its utter failure; a look at the project’s timeline and cost is a clear indication of that.
Seven years ago in January 2008, Pakistan Electric Power Company (PEPCO) signed Rs23 billion (around $329 million) contract with Dong Fang Electric Corporation of China to construct the Nandipur Power Project. The project was planned to be a 425MW combined cycle thermal power plant situated at Nandipur near Gujranwala in the Punjab, with a potential to reach 1000MW. The project was scheduled to be completed by April 2011, but the then Law Minister delayed the approval of the Nandipur project for two years. The delay resulted in around Rs43 billion being lost during 2012-13, and $85 million worth of machinery being marooned at Karachi Port, which ultimately led to termination of the construction contract by the Chinese counterparts in 2012. That was thought to be the end of it.
However, in June 2013 when the incumbent government took office, it started renegotiating the power project with the same Chinese firm to resume work. And by May 31, 2014, the Prime Minister inaugurated the power plant. This happened within a year, and that’s the only positive aspect of it; in only five days, Nandipur Power Plant was nonoperational. Though after a year, i.e. in July 2015, the project was allegedly operational again, by that time the whole project was shrouded in various sorts of obscurities.
Why did the government commission the project when it wasn’t complete or ready? What have been the key issues with its operational capability? What is the actual cost of the project? These are some key questions, and the answer to these make the government rebuttal weak.
First and foremost, the cost of the project has escalated sharply, and why wouldn’t it; it took seven years for the project to start generation and that too has become controversial. The initial contract cost was around Rs23 billion, which shot up to Rs58 billion when the present government renegotiated it – an increase of 152 percent. A new mystery engulfed the contentious project when NEPRA declared the cost to have skyrocketed to Rs84 billion; however, the Federal Minister for Water and Power has clarified on television that the actual cost of Nandipur Project is the same, with around Rs50 billion out of the total spent on the project so far.
The main reason for the cost escalation has been cost overruns, and operational, political and administrative mismanagement. Besides the increase in the project cost, the plant when inaugurated did not have a furnace oil treatment plant (FOTP), which was crucial as the project is based on furnace oil as opposed to diesel. Later the FOTP arrived after the plant was inaugurated by the Prime Minister, and it was realised that the treatment plant’s capacity was not adequate for 425MW furnace oil. Even after that the plant could not start generation as further processing of faulty FOTP met with delays.
It would be no exaggeration if the government demeanour is matched with haste and lack of professionalism. The Ministry of Water and Power is now left with no option but to accept the blunders on their part. In a television show, the Minister for Water and Power has been seen accepting that the reason behind Nandipur Power Plant not running at its full capacity has been technical faults in the fuel treatment plant, but he shifted the blame to the previous government saying that it was purchased in their tenure.
The project is being progressed to being converted to gas by next year with a target of 525MW to reduce the per unit generation cost. Not only that, the project has been an example of professional incompetence as well – something that is prevalent in most endeavours of the government.
Issues of transparency, professional incompetence and political intrusion have been the key issues of the energy sector, and the public sector at large. Whether it’s Nandipur, the LNG deal, PSO’s corporate governance or any other matter, the results won’t be promising with such attitudes, reflecting negatively on the government’s modus operandi. And no project would see the light of the day.