ISLAMABAD: The World Bank on Wednesday dubbed the progress on the Khyber Pakhtunkhwa Hydropower and Renewable Energy Development project “moderately unsatisfactory”, with “substantial risk” to its $727 million loan meant for strengthening provincial institutions and increasing renewable energy generation.

In its public disclosure, the Washington-based lending agency rated the progress towards the achievement of project development objectives as “moderately unsatisfactory”. Various segments of the loan were approved in 2020 with a targeted completion date of Nov 30, 2027.

However, the World Bank rated the overall implementation progress as “moderately satisfactory” and described the overall risk rating as “substantial”.

The rating was based on “moderate” risk in the political and governance and technical design categories, but “substantial” risks emanated from macroeconomic, institutional capacity, fiduciary issues and environmental and social parameters.

According to a World Bank document, each dimension is rated on a four-point scale — high, substantial, moderate, or low— depending on the likelihood that the risk will materialise and the expected severity of its impact if it does materialise.

The bank said it processed restructuring of the project to align its scope and financing with implementation priorities at the request of the government.

The report stated: “Overall, implementation has gained momentum, with key milestones achieved under the Gabral-Kalam Hydropower Project, including commencement of civil works, progress on land acquisition and advancement of the electro-mechanical works procurement.

“The project will continue to focus on timely implementation, effective contract management, and compliance with applicable environmental and social requirements.”

The original loan package, approved on Sept 24, 2020, involved a $594m investment in hydropower development and renewable energy, $59m in environmental and social management, $55m for institutional strengthening and project implementation support, besides about $15m in financial charges on the bank loan itself.

The market-based bank loan worth $200m became effective in Sept 2020, but only $3.95m has been disbursed so far, accounting for less than two per cent.

The concessional development loan of $240m became effective around the same time and its disbursements amounted to $34m to date, about 14pc of the size.

The KP Hydropower and Renewable Energy Development project was conceived as a transformational programme to help build capacity and institutions for harvesting the vast renewable energy potential in the province.

To achieve the objectives, the project was designed to be implemented through four components: one of them being the development of public sector investments in hydropower and renewable energy projects, including the Gabral-Kalam Hydropower Plant (GKH), an 88-megawatt (MW) run-of-river hydropower project capable of generating 339 gigawatt hours (GWh) annually.

Another component covered cascade development of river basins and financing the construction of 157MW Madyan and other hydropower facilities on the Swat and other river basins.

The total hydropower potential of the Swat River Basin was estimated to be more than 2,000MW for which several projects had been identified and new potential sites were required to be examined.

Additionally, floating or land-based solar photovoltaic systems (a type of solar panel) on hydropower assets were envisioned.

ISLAMABAD: The government is considering establishing two new bodies — a regulatory authority and a marketing entity — for the construction industry along with a three-year defect liability period for major construction projects in the country.

Private sector figures in construction and the government, however, differ over the financial size for the application of a defect liability period, with the construction industry seeking a minimum threshold of Rs20 billion and the government pushing for lower amounts.

These issues were discussed at an exploratory meeting, chaired by Economic Affairs Minister Ahad Cheema, on introducing reforms for the country’s construction sector, improving project delivery and addressing key issues faced by the industry.

Minister of State for Finance Bilal Azhar Kayani, Secretary Housing retired captain Muhammad Mahmood and other senior officials also attended the meeting.

The meeting discussed the proposed Construction Industry Development Authority (CIDA) Bill, with Cheema stressing that it required detailed consideration, including whether to establish a single body for the construction sector or two separate entities — one to regulate the sector and another to promote the construction industry and handle related matters.

The participants decided to continue engagements with stakeholders, including the relevant agencies led by Kayani and representatives of the Constructors Association of Pakistan (CAP), and to fine-tune the proposed institutional structure.

Retention money deposited by contractors during the defect liability period was also discussed, with a proposal considered to place these funds in accounts that earn a return, with the principal amount and interest paid back to contractors after the stipulated period.

Cheema called for further consultation to develop a workable mechanism.

Additionally, the meeting considered applying the existing Dispute Avoidance and Adjudication Board (DAAB) mechanism to government projects. DAAB would monitor project implementation and help prevent or resolve disputes as they arise, while CAP proposed applying the mechanism to projects valued at Rs20bn and above.

However, Cheema called for the proposed threshold to be lowered and further consultation among relevant stakeholders to determine an appropriate limit.

The forthcoming framework for the construction sector will also draw on the rules and standards of the International Federation of Consulting Engineers (FIDIC). Cheema underscored the importance of using these international standards as a key reference.

The meeting also directed the Pakistan Public Procurement Regulatory Authority (PPRA) to begin work on introducing a defect liability period for major projects of at least three years or more, with the measure to be extended to smaller projects in phases.

In August, it emerged that the government was contemplating a comprehensive package to invigorate the construction industry, aiming to simplify regulations, attract investment, and bolster institutional support.

The package envisaged a series of measures, including the establishment of a Construction Industry Development Board (CIDB), the evaluation of a dedicated Construction Development Bank (CDB), the rationalisation of import and export policies, and targeted tax reforms for the construction sector.

Correction: A previous version of this story stated that the government was considering the establishment of two regulatory authorities for the construction industry. The error is regretted.