Faced with a chronic power shortage that is stymieing economic growth, Pakistan has announced plans to tap some of the enormous potential for hydropower in the country’s north.

The government aims to add 13,000 megawatts (MW) of electricity to the national grid system through a series of hydro projects ranging in size from 10 to 1,000 MW, according to officials in the federal water and power ministry. This will represent a nearly eightfold increase in hydro capacity.

However, the country’s enfeebled economy means that it must rely heavily on foreign investment to complete the projects by 2018 as planned. And there are concerns that a draft resettlement policy for those displaced by the projects shows little sign of being approved by the government soon.

Pakistan currently generates about 14,000 MW of power, but demand is 18,000 MW, surging to 20,000 MW in summer months when many people use air conditioners.

Frequent and protracted power cuts have crippled the country’s economic activity and stalled growth.

“The industrial sector particularly has suffered massive setback, as tens of thousands of industrial units have closed down, rendering millions of workers jobless,” said Ishrat Hussain, former governor of the State Bank of Pakistan in Karachi.

Garment factory worker Zulekhan Fatima, for instance, lost her job last June because her employer was not able to afford to pay his workers to sit idly most of the day during long power outages.

“I was among 140 workers that were sent home,” the 38-year-old recalled. She now earns her living tutoring schoolgirls at her home in Rawalpindi, some 10 km east of Islamabad.

“I hope reducing power cuts by boosting energy production will really help millions like me to return to jobs,” she said.

THE RANGE OF PROJECTS

In January 2013, Prime Minister Nawaz Sharif’s government initiated a multi-billion dollar programme for five hydropower projects totalling nearly 5,800 MW in northern Pakistan.

The projects are slated to be built with financial and technical support from Austria, China and Germany, as well as the Asian Development Bank, the World Bank, the International Finance Corporation and USAID.

The Export Import Bank of China has already released $17 million, the first instalment of a $448 million loan, for the Neelum-Jhelum hydropower project, on the Neelum river in Muzaffarabad, about 125 kilometres (80 miles) northwest of Islamabad, Pakistan’s capital. Further instalments will be provided over the next two years. The project is due to be completed by December 2016.

Hydropower currently provides almost 11 percent of Pakistan’s energy mix. Fossil fuels such as natural gas, oil and coal account for 88 percent.

Pervaiz Rashid, a government spokesperson, said in a phone interview that increasing the contribution of hydropower, which is clean, renewable and cheaper than other sources, is at the centre of the government’s energy policy.

“We understand that power produced from oil and coal is environmentally unsustainable and costlier for consumers, health damages aside,” he said.

The deputy chairman of the Planning Commission of Pakistan, Ahsan Iqbal, said that the country’s enormous hydroelectric potential, estimated at 100,000 MW, has never been properly put to use.

According to Iqbal, the reasons have included a lack of interest on the part of previous governments, shortages of funds, and a reluctance of foreign investors to put money in a country plagued by security problems and administrative inefficiencies.

Officials are hopeful that promised funding from other governments and international lending agencies will now allow plans that had not progressed beyond feasibility studies to be swiftly implemented.

The French Development Agency (AFD) and Germany’s Ministry for Economic Cooperation and Development (BMZ) will give 50 million euros and 20 million euros respectively towards the 35 MW Harpo hydropower project in Skardu district in Gilgit-Baltistan province, said Ali Raza Bhutta, joint secretary of the Federal Economic Affairs Division. The total cost of the project is 90 million euros.

The German Development Bank is part of a joint venture led by a Chinese firm for the 122 MW Keyal Khwar Hydropower (KKH) project, slated to be operational in four years.

The European Investment Bank (EIB) has said it will release 100 million euros by the end of March towards construction of the plant, which lies on a tributary of the Indus River in Dasu district in Khyber-Pakhtunkhwa province, in the country’s northwest.

Gilgit-Baltistan province’s chief minister, Syed Mehdi Shah, has approved proposals for an additional 16 small hydropower projects to be built in the next four years at a cost of $122.5 million, said Abid Sher Ali, federal water and power minister.

In early February, Pakistan’s Federal Central Development Working Party approved a major project, the 4,300 MW Dasu run-of-river plant, which is to be built partly with a $700 million loan from the World Bank.

“Although recently Pakistan has succeeded in exploring some sources of funding to tap the country’s vast hydropower potential, it is further exploring more funding channels to increase hydropower production as high as 40,000 WM by 2030,” Abid Sher Ali added.

DISPLACEMENT ISSUES

Many of the hydro power projects are located in mountainous areas that are not densely populated. However, independent development experts warn that the government agencies concerned must respond adequately to the issues of displacement and resettlement of thousands of people who will be affected.

Provincial governments use an 1894 law, the Land Acquisition Act, to secure land for public purposes and for companies. But the law’s provisions are unclear, leading each province to interpret and implement it according to its own systems, said Ajmal Khan, senior representative of the Pakistan Network for Rivers, Dams and People (PNRDP), which works on water rights and resettlement issues of people affected by large dam projects.

Khan said that one of the major drawbacks is that the act only compensates landowners and does not cover resettlement, relocation, loss of livelihood or the rights of affected persons without a land title.

Government officials say that a draft National Resettlement Policy is awaiting cabinet approval. The policy was originally drafted in 2002. Jawaid Ali Khan, former director-general of the now defunct federal ministry of the environment, said that the lack of progress in developing the country’s hydropower sector had prevented it from being approved sooner.

Ajmal Khan of the PNRDP underlined the need for a comprehensive and viable national resettlement policy with clear guidance for planning and implementing resettlement in hydro project areas.

Even so, he believes such a policy will take another two or three years to be passed by the cabinet because the government is preoccupied with security issues.