The Neelum Jhelum Hydropower Project, once heralded as a landmark for clean energy in Pakistan, has been declared a failure by the Auditor-General of Pakistan in a scathing performance audit completed for the 2022-23 fiscal year.
The 969MW project, designed to generate 5,150 GWh annually and solidify Pakistan’s water rights over the Neelum/Kishenganga River, fell short on nearly every major objective. According to the official report, “the project could not reap envisaged benefits of generation of planned electricity, establishment of water rights over Neelum River, selling of carbon credits under Clean Development Mechanism (CDM) and completion of mitigation measures to safeguard the environment”.
Planned to be completed in eight years at a cost of Rs.84.502 billion, the project instead took sixteen years and cost Rs.423.446 billion as of June 2023 – an overrun of Rs.338.944 billion. The audit notes: “Non-adherence to guidelines of Manual for Development Projects resulted into time overrun of nine (09) years and cost overrun of Rs.338,944 million as compared to 1st revised PC-I”.
The report is blunt: “Prime objective of planned generation of electricity could not be achieved,” and that generation in recent years dropped as low as 2,476 GWh – less than half the target – before “coming to a complete halt on July 06, 2022 when the project suffered a major break down due to collapse in Tail Race Tunnel (TRT)”.
Pakistan also lost priority water rights to India on the Neelum/Kishenganga due to project delays, as the International Court of Arbitration found “India had a stronger claim to having coupled intent with action at the Kishenganga Hydro-Electric Project … resulting in the former’s priority in right over the later with respect to the use of the waters of the Kishenganga / Neelum River for hydro-electric power generation. … one of the objectives of the project to establish water rights on River Neelum could not be achieved due to delayed completion of the project in 2018 instead of 2010”.
The report also highlights “Non-earning of revenue as per Clean Development Mechanism – US$ 50.133 million,” criticising management’s “non-adherence to the PC-I provisions” which led to failure to earn anticipated international carbon credits. Environmental issues also mounted due to “improper environmental studies at planning stage – Rs.3,054.664 million,” resulting in river flow reductions and adverse impacts on Muzaffarabad city.
Contractors also failed to deliver both punch list items and spare parts required for maintaining the power station, prompting the audit to recommend management “justify delay in completion of punch lists items besides taking action against the contractor as per contract provisions”. Meanwhile, the collapse of the Tail Race Tunnel resulted in a “generation loss – Rs.20,387.422 million,” with insurance claims of Rs.41,964.645 million still unpaid as of the report date.
Echoing public disappointment, the audit concludes, “Major collapse in the TRT of the powerhouse after few years of construction also casts doubt about the quality of design and works … neither the envisaged benefits for generating 5,150 GWh electricity units could be achieved nor water rights over Neelum River established due to loosing Kishenganga case in International Court of Arbitration”.
The report calls for urgent reforms, accountability, and completion of outstanding project obligations.
