CHITRAL: The foreign contractor has stopped work on the Lawi hydropower project in Lower Chitral district over failure to manage costs.
Sources said that the contractor, a Chinese company, had slowed down work for one and a half years in light of the escalating costs caused by the devaluation of Pakistan rupee.
They said the company contacted the government-owned Pakhtunkhwa Energy Development Organisation (PEDO) for the revision of project costs but the latter refused prompting the former to halt work.
Sources said the contractor was bound by the Oct 2016 agreement to make payment in Pakistani rupee and at that time, one US dollar was equivalent to Rs100.
They said the unmanageable costs caused by massive rupee devaluation forced the contractor to request the Pedo for appropriate cost increase to save it from losses but the request was rejected.
Contractor demands cost revision over rupee devaluation
The sources said the contractor was bound by the agreement to complete project at the cost of Rs15 billion with no permission for cost increase over current devaluation or other unforeseen adverse circumstances.
They said the government could increase project cost if the need arose but that was its discretion.
The sources said the company was seriously thinking about backing out of the contract to prevent further losses.
They said the termination of contract by either side would cause the work to suffer.
The sources said 65 per cent of work had yet to be completed, while it was scheduled to be completed by Nov 2021.
They said the project would generate Rs2.5 billion annually, so the cost escalation was inevitable for its completion on time.
The sources said the retendering and contract award would not only waste time but it would also automatically increase project cost by at least Rs5 billion.
They said the PEDO should accept the Chinese company’s demand to ensure completion of work on time.
The sources said if the company backed out of the contract, it would lose around Rs200 million security deposit but if it continued with work, the loss would be around Rs3 billion.–Zahiruddin