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It is difficult to summarise the professional career of Shakil Durrani Starting from 1971, when he topped the CSS examination, his four decades plus of experience have taken him from Chief Commissioner Northern Areas, Chief Secretary of Azad Kashmir and Government of the then NWFP to Chairman Railways and Chairman Wapda (2007-2012). He has also been Advisor for Ministry of Water & Power's Diamer Basha Dam project. In this short interview, Durrani talks about Basha dam and related power sector affairs. Below are edited transcripts from our sit down in Islamabad.
BR Research: What are your thoughts on the Sino-isation of Pakistan's power sector?
Shakil Durrani: I very firmly believe that when you are choosing a contractor via bidding process for even a small hydel power station, you should never choose the lowest; you should choose the best even if their bid is higher.
For instance, when I headed Pakistan Railways for three years, we came to the conclusion that if we have to buy locomotives, then we should buy them from countries that have sold locomotives in two continents over the last 10 or 20 years. This convention was infringed and we imported Chinese locomotives - the rest as you know is history. You have to understand that if certain locomotives are being successfully run in two continents over the last 10-20 years, then it means that they are reliable.
Pakistan is too poor to buy cheap. You can't buy cheap; a cheap item doesn't last, so you have to buy again and again, whereas good equipment - for instance the GM and GE locomotives - run for 35 to 40 years, which is well beyond their useful lives.
BRR: You have been actively advocating for Diamer-Basha dam. Can you share some of the context behind it?
SD: Aside from the fact that we need cheap power, which Basha can provide, we also have to realise that Tarbela dam has a very serious siltation problem; one-third of Tarbela's reservoir capacity is gone. Every day, half a million tons of silt goes into Tarbela.
Two hundred million tons of silt that goes into Tarbela ever year; Wapda's reservoir maintenance is standard but the problem is that nowhere in the world is there a proven way of removing the inert silt that accumulates in Tarbela lake.
About 4-5 years ago, when I was heading Wapda, we asked for a study on silt removal and we found out that there are no credible means to remove the silt from any dam. The consultants of Wapda, Mot Mcdonald, have sent their report to Wapda which would study the contents. Flushing may be the best option but then how do you remove the silt downstream of Tarbela, as there are 6 major barrages up to the sea.
Now in about 40 years, one-third of Tarbela is gone, so you can do the math as to when will Tarbela go out of action. It will continue to function as power can still be generated but the reservoir function of the dam will keep on eroding and water storage capacity will keep on reducing.
But if Basha dam is built then Tarbela storage life is increased by 35-50 years.
BRR: So then why has Basha been on the back burner for so long?
SD: In 2002, when General Musharraf wanted to start work on Basha, he was told there was no study on the dam. It took six years to complete the studies. When it was approved and by the time I joined Wapda in 2007, and the Kalabagh experience was before us, I started acquiring the land quickly.
However, the Asian Development Bank, which had committed a number of times to be the lead donor, had more or less backed out whereas the World Bank had backed out earlier - and the cost of building Basha escalated from $11 billion to $14 billion because of the delay.
After five years of engagement, the ADB just moved away and said it's too large project and that we need the World Bank to team up with us. But we said, 'you know that the World Bank said a long time back that they will not fund the Diamer Basha. How do you expect them to do it now?'
The World Bank, having come to the conclusion that they cannot be a part of Basha because of their own reasons, tried to make sure that Basha should not be built. They said you should do Dasu; Dasu is down the river 4300 MW. Basha is 4500 but Dasu stores no water.
I had authorised the detailed engineering study of Dasu through the World Bank and I regret having done it. In a way, I feel that if there was no detailed engineering study available for Dasu then Diamir Basha would have been built as the only choice.
I was of the view that Wapda must have 6-7 detailed engineering studies in their closet so that whenever you have the money you can pick the most feasible and go ahead and build it. So I said that Dasu, Bunji, Kohala, Skardu, Thakot, Munda, and Kurram Tangi - all studies should be prepared beforehand so that you don't lose time, as we did in the case of Basha in 2002.
So Dasu's study was authorised and it was not even completed when the World Bank said that they will provide $600 million dollars for doing Dasu; the rest could have been generated from the Chinese or a consortium of local private commercial banks. But building Dasu is really going to push Basha back.
BRR: But this government has already sanctioned Rs55 billion for Basha this year.
SD: Yes that's a good step by the government and the Prime Minister last week again spoke about the need for building Basha dam. They have sanctioned Rs55 billion for the land acquisition cost of the Diamer-Bhasha Dam. Hopefully, all the remaining privately-owned land measuring nearly 18,000 acres will be acquired quickly and the Gilgit-Baltistan administration would transfer the entire state-owned 'ghair mumkin' areas to Wapda at the earliest.
Diamir Basha is a life and death issue for Pakistan and I hope the government can start work on it in 2015-6.
BRR: But where do you get the money for the civil works and the equipment? The World Bank is not interested, nor is the ADB.
SD: I think we should just ignore the Word Bank and the ADB. We should place Basha in the China-Pakistan Economic Corridor. Four billion dollars is the cost of the civil works; the civil works can be given to the Chinese but after competitive bidding.
Bidding is absolutely the key, though competitive bidding would only involve the Chinese companies, as the Chinese would not provide the loans if American or other companies are given the civil works. And some of the Chinese civil works companies are very good. But the consultants should be the Europeans; you can't have Chinese or Pakistani consultants. The electro-mechanical equipment could be bought from the West as their companies have offered suppliers' credit already.
BRR: Would the Chinese allow us having European consultants?
SD: Yes, they do. China has provided $500 million for Neelum-Jhelum and also the full cost of Jinnah Hydel power projects but they have allowed for European consultants.
So we should ask China to give $4 billion for Basha from the $46 billion promise, as the benefits of Basha would be ten times more than all the other 51 projects combined that are a part of the $46 billion package. Basha would provide electricity worth $2 billion dollars a year and save foreign exchange worth $3 billion in oil imports; and we are not even considering the benefits from water use, which is not priced adequately in Pakistan.
But as far as the equipment is concerned, don't buy Chinese equipment; I am very clear in my mind that if there is one percent difference in efficiency between the Chinese and European equipment, it translates into 45 MW a year, which means a few billion rupees of losses a year.
BRR: Can Pakistan afford European equipment?
SD: Never consider that; cost is totally irrelevant. You just have to choose the best equipment. Pakistan is too poor to buy cheap.
When the Mangla dam was being built, we bought two units from Czechoslovakia; the rest were Japanese or European. The unplanned outage of Czechoslovakian units is 5 percent, which means they are out of order five percent of the time, whereas the European and the Japanese equipment outage is about 0.6 percent of the time. This translates into a differential of billions of rupees. So invest in the best technology.
Let me put that into perspective: in the Neelum-Jhelum project, we recently bought the tunnel-boring machines, which is Pakistan's first such purchase in fifty years, even though Pakistan deployed tunnel-boring machines in the 1960s in Mangla Dam. The Chinese were digging the 56 km tunnel by turbo drills, which is a very slow way to do it. The Chinese contractor had already said that they won't buy it because the contract has already been awarded.
But we went ahead and bought it through international bidding. The advantage of buying that machine is that it will complete the work a year and half earlier. Now that will generate 5 billion units a year, which is equivalent to Rs50 billion; in one and half years we will save up to Rs75 billion or $750 million. The cost of the equipment is $93 million; so you know it's so obvious to pay for the right equipment even if it appears costlier.
BRR: What are your thoughts on solar projects?
SD: It's alright for off-grid solutions. But otherwise, solar is not very efficient because it is going to generate power at Rs17 over 20-25 years. Its plant factor is only 17 percent, which means it only works 17 percent of the time. On the other hand, the more hydel power you generate, the more you subsidise the thermal sector; it's a no-brainer.
BRR: Are you in favour of privatisation of power discos?
SD: I am in favour of privatisation in the long run. But I would privatise the worst first, including Sukkur, Hyderabad, Peshawar, Multan and Quetta. I would never privatise the best, which are Faislabad, Lahore and Gujranwala.
You know we privatised Kapco in the early 90s and every 3-4 years the new buyers recover the full cost of their investment on plant. So how would privatising the best help us? They are the ones which are recovering everything. We must privatise the loss-making generating plants like Muzaffarabad and Jamshoro.
In fact, my view is that we should not sell off these assets; we should lease the poor-performing discos for 10-20 years. Selling assets means that the new buyer raises bank loans from securing real estate and land of these assets and does not make his own investments. For example, we could also lease 10 or 20 high-loss feeders to different parties for 10 or 15 years; the government can say that well, from these feeders we are running a loss of Rs2 million in one feeder, but you, the lessee, should pay us the loss or part of the loss every year, and the rest is yours. Now it's up to you whether you want to put a new feeder or not; or put in new equipment and etc. These things can be worked out.
But either way, there mustn't be any privatisation before setting up strong and independent regulation.
Copyright Business Recorder, 2015
Basha should be made a part of CPEC: Shakil Durrani, former Wapda Chairman | Business Recorder
BR Research: What are your thoughts on the Sino-isation of Pakistan's power sector?
Shakil Durrani: I very firmly believe that when you are choosing a contractor via bidding process for even a small hydel power station, you should never choose the lowest; you should choose the best even if their bid is higher.
For instance, when I headed Pakistan Railways for three years, we came to the conclusion that if we have to buy locomotives, then we should buy them from countries that have sold locomotives in two continents over the last 10 or 20 years. This convention was infringed and we imported Chinese locomotives - the rest as you know is history. You have to understand that if certain locomotives are being successfully run in two continents over the last 10-20 years, then it means that they are reliable.
Pakistan is too poor to buy cheap. You can't buy cheap; a cheap item doesn't last, so you have to buy again and again, whereas good equipment - for instance the GM and GE locomotives - run for 35 to 40 years, which is well beyond their useful lives.
BRR: You have been actively advocating for Diamer-Basha dam. Can you share some of the context behind it?
SD: Aside from the fact that we need cheap power, which Basha can provide, we also have to realise that Tarbela dam has a very serious siltation problem; one-third of Tarbela's reservoir capacity is gone. Every day, half a million tons of silt goes into Tarbela.
Two hundred million tons of silt that goes into Tarbela ever year; Wapda's reservoir maintenance is standard but the problem is that nowhere in the world is there a proven way of removing the inert silt that accumulates in Tarbela lake.
About 4-5 years ago, when I was heading Wapda, we asked for a study on silt removal and we found out that there are no credible means to remove the silt from any dam. The consultants of Wapda, Mot Mcdonald, have sent their report to Wapda which would study the contents. Flushing may be the best option but then how do you remove the silt downstream of Tarbela, as there are 6 major barrages up to the sea.
Now in about 40 years, one-third of Tarbela is gone, so you can do the math as to when will Tarbela go out of action. It will continue to function as power can still be generated but the reservoir function of the dam will keep on eroding and water storage capacity will keep on reducing.
But if Basha dam is built then Tarbela storage life is increased by 35-50 years.
BRR: So then why has Basha been on the back burner for so long?
SD: In 2002, when General Musharraf wanted to start work on Basha, he was told there was no study on the dam. It took six years to complete the studies. When it was approved and by the time I joined Wapda in 2007, and the Kalabagh experience was before us, I started acquiring the land quickly.
However, the Asian Development Bank, which had committed a number of times to be the lead donor, had more or less backed out whereas the World Bank had backed out earlier - and the cost of building Basha escalated from $11 billion to $14 billion because of the delay.
After five years of engagement, the ADB just moved away and said it's too large project and that we need the World Bank to team up with us. But we said, 'you know that the World Bank said a long time back that they will not fund the Diamer Basha. How do you expect them to do it now?'
The World Bank, having come to the conclusion that they cannot be a part of Basha because of their own reasons, tried to make sure that Basha should not be built. They said you should do Dasu; Dasu is down the river 4300 MW. Basha is 4500 but Dasu stores no water.
I had authorised the detailed engineering study of Dasu through the World Bank and I regret having done it. In a way, I feel that if there was no detailed engineering study available for Dasu then Diamir Basha would have been built as the only choice.
I was of the view that Wapda must have 6-7 detailed engineering studies in their closet so that whenever you have the money you can pick the most feasible and go ahead and build it. So I said that Dasu, Bunji, Kohala, Skardu, Thakot, Munda, and Kurram Tangi - all studies should be prepared beforehand so that you don't lose time, as we did in the case of Basha in 2002.
So Dasu's study was authorised and it was not even completed when the World Bank said that they will provide $600 million dollars for doing Dasu; the rest could have been generated from the Chinese or a consortium of local private commercial banks. But building Dasu is really going to push Basha back.
BRR: But this government has already sanctioned Rs55 billion for Basha this year.
SD: Yes that's a good step by the government and the Prime Minister last week again spoke about the need for building Basha dam. They have sanctioned Rs55 billion for the land acquisition cost of the Diamer-Bhasha Dam. Hopefully, all the remaining privately-owned land measuring nearly 18,000 acres will be acquired quickly and the Gilgit-Baltistan administration would transfer the entire state-owned 'ghair mumkin' areas to Wapda at the earliest.
Diamir Basha is a life and death issue for Pakistan and I hope the government can start work on it in 2015-6.
BRR: But where do you get the money for the civil works and the equipment? The World Bank is not interested, nor is the ADB.
SD: I think we should just ignore the Word Bank and the ADB. We should place Basha in the China-Pakistan Economic Corridor. Four billion dollars is the cost of the civil works; the civil works can be given to the Chinese but after competitive bidding.
Bidding is absolutely the key, though competitive bidding would only involve the Chinese companies, as the Chinese would not provide the loans if American or other companies are given the civil works. And some of the Chinese civil works companies are very good. But the consultants should be the Europeans; you can't have Chinese or Pakistani consultants. The electro-mechanical equipment could be bought from the West as their companies have offered suppliers' credit already.
BRR: Would the Chinese allow us having European consultants?
SD: Yes, they do. China has provided $500 million for Neelum-Jhelum and also the full cost of Jinnah Hydel power projects but they have allowed for European consultants.
So we should ask China to give $4 billion for Basha from the $46 billion promise, as the benefits of Basha would be ten times more than all the other 51 projects combined that are a part of the $46 billion package. Basha would provide electricity worth $2 billion dollars a year and save foreign exchange worth $3 billion in oil imports; and we are not even considering the benefits from water use, which is not priced adequately in Pakistan.
But as far as the equipment is concerned, don't buy Chinese equipment; I am very clear in my mind that if there is one percent difference in efficiency between the Chinese and European equipment, it translates into 45 MW a year, which means a few billion rupees of losses a year.
BRR: Can Pakistan afford European equipment?
SD: Never consider that; cost is totally irrelevant. You just have to choose the best equipment. Pakistan is too poor to buy cheap.
When the Mangla dam was being built, we bought two units from Czechoslovakia; the rest were Japanese or European. The unplanned outage of Czechoslovakian units is 5 percent, which means they are out of order five percent of the time, whereas the European and the Japanese equipment outage is about 0.6 percent of the time. This translates into a differential of billions of rupees. So invest in the best technology.
Let me put that into perspective: in the Neelum-Jhelum project, we recently bought the tunnel-boring machines, which is Pakistan's first such purchase in fifty years, even though Pakistan deployed tunnel-boring machines in the 1960s in Mangla Dam. The Chinese were digging the 56 km tunnel by turbo drills, which is a very slow way to do it. The Chinese contractor had already said that they won't buy it because the contract has already been awarded.
But we went ahead and bought it through international bidding. The advantage of buying that machine is that it will complete the work a year and half earlier. Now that will generate 5 billion units a year, which is equivalent to Rs50 billion; in one and half years we will save up to Rs75 billion or $750 million. The cost of the equipment is $93 million; so you know it's so obvious to pay for the right equipment even if it appears costlier.
BRR: What are your thoughts on solar projects?
SD: It's alright for off-grid solutions. But otherwise, solar is not very efficient because it is going to generate power at Rs17 over 20-25 years. Its plant factor is only 17 percent, which means it only works 17 percent of the time. On the other hand, the more hydel power you generate, the more you subsidise the thermal sector; it's a no-brainer.
BRR: Are you in favour of privatisation of power discos?
SD: I am in favour of privatisation in the long run. But I would privatise the worst first, including Sukkur, Hyderabad, Peshawar, Multan and Quetta. I would never privatise the best, which are Faislabad, Lahore and Gujranwala.
You know we privatised Kapco in the early 90s and every 3-4 years the new buyers recover the full cost of their investment on plant. So how would privatising the best help us? They are the ones which are recovering everything. We must privatise the loss-making generating plants like Muzaffarabad and Jamshoro.
In fact, my view is that we should not sell off these assets; we should lease the poor-performing discos for 10-20 years. Selling assets means that the new buyer raises bank loans from securing real estate and land of these assets and does not make his own investments. For example, we could also lease 10 or 20 high-loss feeders to different parties for 10 or 15 years; the government can say that well, from these feeders we are running a loss of Rs2 million in one feeder, but you, the lessee, should pay us the loss or part of the loss every year, and the rest is yours. Now it's up to you whether you want to put a new feeder or not; or put in new equipment and etc. These things can be worked out.
But either way, there mustn't be any privatisation before setting up strong and independent regulation.
Copyright Business Recorder, 2015
Basha should be made a part of CPEC: Shakil Durrani, former Wapda Chairman | Business Recorder
