Diamer Bhasha Dam: Pakistan’s new Achilles heel

In mid-August 2013, the Economic Coordination Committee (ECC) of Pakistan refused to share relending and repayments liability of loans with regard to two upcoming hydropower projects in Gilgit Baltistan, citing the region’s autonomous status under Empowerment and self-governance order 2009. Acting on a request for exemption from the region, which is financially dependent on Islamabad, and does not have a revenue generation system in terms of taxation etc., the ECC stated that the Gilgit Baltistan government should be able to repay the loans by itself, given the fact that it would harness the proceeds from the hydropower projects in the region. The ECC’s decision has come as a dampener for several hydropower projects in the region seeking foreign assistance. Significant among them is the Diamer Bhasha Dam (DBD), a multibillion dollar project proposed to be constructed on the Indus River in Diamer district of Gilgit Baltistan.

The DBD was conceived back in July 2001, presented as part of Wapda’s (Water and Power Development Authority) Water Vision 2025. Designed primarily to fulfill the energy requirements in Pakistan, the dam was also projected to facilitate irrigation for the agricultural sector, generate employment for locals and act as a silt-trap for the Tarbela dam located further downstream. As per the plans, a huge reservoir was to be built in the Diamer district whereas the two power houses, was to be located in Kohistan in the neighbouring province of Khyber Pakhtunkhwa (KP). With an expected capacity of 4500 MW, the proposed roller compact concrete (RCC) dam was to be one of the largest in the world. The dam structure would stand 922 feet high making it the tallest in the RCC category. The revised cost of the project currently stands at approximately $ 14 billion.

Since its inception, the DBD project has been afflicted by controversies. There are fundamental complications regarding the location of the dam in a disputed region. Moreover, there are other problems too — of unresolved boundary issues between the disputed Gilgit Baltistan and the Pakistani province of KP, which have led to contesting claims over their share in the royalty from the dam. The ecological impact of the project site being situated in a high seismic zone, which is prone to landslides and floods are added concerns. The region has witnessed colossal calamities in the past including the earthquake in 2005, the Attabad landslide in 2010 that created an artificial lake wiping out an entire village, and more recently the Gyari avalanche tragedy in April 2012.

The DBD project has featured regularly in media reports in Pakistan. Apart from other factors, continuing deficit of required funds has been cited as the main reason for which the dam has remained in limbo so far. According to Wapda, the current funding status of the Diamer Bhasha project is that the “acquisition of land and construction of infrastructure are being implemented through funds by GoP [Government of Pakistan]. The ADB [Asian Development Bank] has shown interest in financing the project. Response from USAID, ADB and other donor agencies are also encouraging. The GoP has requested FoDP [Friends of Democratic Pakistan] for financing of the project and their participation is also expected.”1 The idea of an ambitious project such as the DBD rests primarily on external funding, sourced from international financial institutions (IFIs) and other willing donor states. The World Bank and the ADB have been approached by Pakistan for funds for the project. Other financial institutions include the Islamic Development Bank (IDB) and the Kuwait Fund for Arab Economic Development (KFAED). The massive project cost can be administered only through a consortium as a single source/donor will not suffice.

Back in 2008, China was reported to be the lead financer of the project. While China is engaged in several infrastructural activities across the PoK, it is unlikely to invest a huge sum in a single project. After initial hesitation, the US has agreed to provide partial funding. The US ambassador to Pakistan, Richard Olson, expressed his country’s support for the project in July 2013, and approximately $20 million has been approved for conducting a feasibility study. Russia and Japan have also reportedly shown considerable interest in the project. However, financial arrangements with both countries have not yet materialized.

The World Bank put forward the condition that Pakistan needed to obtain and furnish a No Objection Certificate (NOC) from India, as the proposed dam site falls in a region claimed by India. Similarly, the ADB in 2011 expressed reservations about the feasibility and overall implementation of the project based on three assessments — a fair and transparent land acquisition process, a comprehensive, amicable resettlement plan and due attention to ecological concerns.2

The non-availability of funds has primarily led to a protracted delay in the implementation of the DBD project. It has led to a deep sense of cynicism and angst amongst the people of Pakistan about the project’s future. While Islamabad has time and again reiterated its commitment to the completion of the project, the domestic pressures for the DBD seem to have multiplied ever since the Dasu dam, a smaller run of the river project located in Kohistan gained traction. Notably, the World Bank has shown preference for Dasu and it is feared that the DBD could meet the same fate as the Kalabagh project which was shelved after getting embroiled in inter-provincial politics.

Even as Islamabad has made consistent efforts to put the DBD on track, the truth is that the project has failed to make headway and its viability is questionable. Due to spiralling project costs, the stated reservations on the project by the IFIS and the economic crisis in Pakistan, the DBD is unlikely to take off any time soon in future.

The project is worrisome for India. It is a political setback if a mega dam is constructed with foreign assistance in a region claimed by India. At the same time, the ecological fallout of the project is of considerable concern to adjacent areas in India. Therefore, it is natural for India to raise its objections and convince donor agencies and countries like the US, Japan and Russia to stay away from the project.

In 2006, India, had in passing, objected to the construction of DBD (incorporated in a statement issued to appreciate Pakistan’s humanitarian assistance towards an Indian ship). In March 2013, news reports in Pakistan suggested that MEA had through a “verbal demarche” (from Pakistan’s High Commissioner in New Delhi) sought details of ongoing projects and the donor countries and agencies involved in PoK.3 Reports further suggested that Pakistan was asked to seek NOC from India for any project in the PoK.

While the Pakistan government may not have abandoned the DBD but the prospects are challenging and possibly insurmountable.

Views expressed are of the author and do not necessarily reflect the views of the IDSA or of the Government of India.

• 1. Diamer Basha dam project, updated status on August 23, 2013 at http://www.wapda.gov.pk/htmls/future-index.html.
• 2. Two days stake holders seminar on land acquisition and resettlement,
  Diamer Basha dam project, (January, 6-7, 2011), Islamabad at http://www.wapda.gov.pk/htmls/future-index.html.
• 3. The information was based on a letter written by the Director General South Asia in Pakistan’s foreign ministry dated November 28, 2012 to the Secretary of Water and Power in Islamabad. (Khalid Mustafa, India asks Pakistan to seek NoCs for projects in GB, AJK, The News, March 3, 2013 at http://www.thenews.com.pk/Todays-News-13-21335-India-asks-Pakistan-to-se….)