Key points
- The project revised from 88MW to 94.5MW.
- Original cost Rs. 36.43b; now up to Rs. 84b.
- First tender in 2022 got zero contractor bids.
- PMO blamed for not conducting early roadshows.
- Second tender bids: Rs. 39b and Rs. 65b.
- Lowest bidder failed to provide performance guarantee.
- No construction started despite 2027 completion deadline.
- Completion now expected by 2029 or 2030.
PESHAWAR: The World Bank has imposed an $800,000 commitment charge on the Khyber Pakhtunkhwa government for failing to meet targets on the long-delayed Kalam–Gabral Hydropower Project in Swat—more than six years after securing international funding.
According to official documents available with the WE News English, the project—originally planned at 88-megawatt (MW) but later revised to 94.5 MW after redesign—was approved in October 2020, with the World Bank providing a loan of $220 million.
At the time of the loan agreement, the exchange rate was Rs. 165 per US dollar, equating to approximately Rs. 36.3 billion. The original PC-1 estimated the total project cost at Rs. 36.43 billion, with work scheduled to begin in December 2020 and completion targeted for November 30, 2027.
Bidding process falls flat
An engineering estimate of Rs. 18 billion was allocated in the PC-1 specifically for civil works—defined as the construction of the dam, roads, tunnels, bridges, connecting channels, and sand traps. However, the first tender issued in 2022 received no bids, leaving the project dead in the water from the very start.
Project Director and Acting Chief Engineer of the Project Management Office (PMO), Mustafa Kamal, says five to six Chinese firms had initially shown interest but did not participate in the bidding—an outcome that surprised both the provincial authorities and the World Bank. Sources, however, attribute this to the PMO’s poor performance, including its failure to conduct roadshows before the first tender to attract qualified firms—essentially dropping the ball at a critical moment.
The second tender floated in October 2023 attracted two firms: joint venture by M/S China Goudong & partner company RMS; and GRC/AGE, who submitted bids of Rs. 39 billion and Rs. 65 billion, respectively.
Second tender hits snags
After the lowest bidder, China Goudong, failed to submit the required performance guarantee, Mustafa Kamal said that every participating company deposits a bid security through its bank. In this case, the provincial government has sent a formal request to the concerned bank to transfer the forfeited amount to Khyber Pakhtunkhwa’s account.
The World Bank subsequently instructed the provincial government to initiate negotiations with the second bidder, GRC. Nevertheless, the World Bank objected to the higher bid amount and demanded price revisions.
Negotiations with the lowest bidder were formally terminated in October 2024, and in February 2025, the World Bank conditionally permitted talks with the second bidder—on the condition that the bid of Rs. 65 billion be reduced to a more acceptable level.
Critical roles mishandled
Meeting minutes from the Central Development Working Party (CDWP) dated September 15, 2020, state that only professionals with proven experience in successful hydropower projects should be appointed. Despite this, key positions such as Project Director and Chief Engineer were filled by individuals lacking relevant experience, now the chief engineer has resigned due to unknown reasons, further throwing a spanner in the works.
Sources within the department reveal that the PC-1 is now undergoing revisions and the project cost is expected to escalate to between Rs. 75 billion and Rs. 84 billion. The civil works estimate alone could rise from Rs. 18 billion to between Rs. 51 and Rs. 55 billion. If approved, this would represent an increase of more than 100 per cent in the project outlay—a jump that may require special legal approvals as the current rules and regulations do not permit such escalation.
No ground broken
Alarmingly, despite the 2027 completion deadline, no physical construction has begun, leaving the project running against the clock without even a finalised contract.
To oversee hydropower initiatives like Kalam-Gabral and another in Madyan, the provincial Energy Department had established a Project Management Office (PMO) within the Pakhtunkhwa Energy Development Organisation (PEDO). The PMO was also tasked with hiring international consultants and conducting feasibility studies for future power generation projects.
Sources say the PMO was verbally advised to engage Water and Power Development Authority (Wapda) to attract a broader pool of contractors, as its projects typically receive multiple bids. However, this advice was not acted upon in time. While roadshows were eventually held before the second tender, only two contractors participated—raising allegations of possible favouritism towards certain firms within PEDO and resulting in significant delays and financial losses for the provincial government.
Recurring fines loom
Insiders note that despite annual assurances to the World Bank regarding progress, PMO has repeatedly failed to meet its obligations, resulting in recurring commitment charges. As of 2025, the total fine stands at $800,000 and will continue to grow if delays persist.
A senior PEDO official, speaking on the condition of anonymity, confirms that the World Bank loan was sanctioned for a 25-year term.
Nonetheless, continued delays and failure to meet agreed milestones have turned the project into a financial burden on the provincial government—a white elephant in the making.
Challenges ahead
The PMO—responsible for encouraging broader contractor participation—has fallen short of its mandate. Moreover, the unit cost of electricity generated was initially estimated at the original Rs. 36 billion project cost. Now, with the cost potentially rising to Rs. 75 billion or above, there are serious doubts about whether the federal government will approve higher tariffs or maintain the original rate, casting uncertainty over the project’s long-term financial viability.
The project is divided into three packages. Package One covers the civil works, for which the contract has yet to be awarded. Package Two involves electromechanical works; the financial bids have recently been opened, with two companies participating. The first is Argentine firm IMPSA, which submitted a bid of Rs. 19 billion, while the second is Austria-based ANDRITZ, which quoted a bid of Rs. 23 billion.
The third package relates to the colony construction, which has been awarded to a company for Rs. 1.6 billion. Approximately 60 per cent of this work has already been completed.
According to Project Director and Acting Chief Engineer Mustafa Kamal, the project’s capacity was originally designed at 88 MW but has risen to 94.5 MW after redesign. He states that negotiations are currently underway with the second bidder, whose bid is higher, in an effort to bring down the cost. For this purpose, the PC-1 will be revised.
Construction of the civil works is expected to take about four years, with completion likely by 2029 or 2030. Kamal warns that if the project is retendered, there is a possibility that no company will participate, which would lead to further delays.
Therefore, the team is seeking to make full use of the available options to avoid going back to square one.
