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    Work on Lawi hydro power project stopped due to devaluation of Pakistani currency against dollar

    By Zahiruddin

    CHITRAL: Work on the Lawi hydro power project (69-mega watt) in Lower Chitral has been stopped by its contractor, a Chinese Construction company which faced heavy loss due to the devaluation of Pakistani currency against dollar.

    Sources confirmed that the construction company had already started decelerating work on the site during the past one-and-half year and had remained far behind the target as ‘more work meant more loss’ for the company.

    He said that the when the when the agreement was signed between the Chinese company and the Pakhtunkhwa Energy Development Organization (PEDO) of the government of Khyber Pakhtunkhwa in October 2016, one American dollar was equivalent to Rs. 100 and the payment was to be made in local currency.

     A well-informed source said that the Chinese company had been taking the case with the provincial government for escalating the rates keeping in view the fall of Pakistani currency by about 55 percent thereby inflicting a colossal loss on it.

    He said that when the provincial government did not give any encouraging response to the company on its request of escalation due to which it decided to halt the work on the site.

    He said that it was a fixed price contract of Rs. 15.000 billion in which no escalation is permissible in case of fall in currency rate or other unforeseen adverse situation.

    He said that in this situation the company is seriously contemplating on back out from the contract as the magnitude of loss in such case will be less than the loss if it carried on the work on the existing rate as 65 percent work is still remaining.

    The source said that the government will also suffer loss in case the company backed out or it terminates the contract due to the slow pace of work while the work is scheduled to be completed by November 2021.

    The source said that as per agreement terms, the company cannot claim for escalation in its rates per item due to the fall in the value of Pakistani currency and it is the sole discretion of the government to adjust the prices commensurate the existing market rates.

    He said that escalation in the rates was inevitable for PEDO for timely completion of the power project which will generate Rs. 2.5 billion annually when commissioned to work and delay means loss to it on daily basis.

    He added that PEDO has two options before it which are either to terminate the contract of the Chinese company or escalate the rates.

    “In case of termination of the contract and re-tender, the contract will be awarded as per composite scheduled rates of 2020 which will increase its cost by at least Rs. 5 billion while a considerable amount of time will be wasted to fulfill the requirements and the new contract will take further time in starting work on the site.

    It will be a wise decision if the PEDO increases the rates of the Chinese company so that the work gets momentum ensuring its timely completion”, he said.

    The source added that there was no paucity on the part of PEDO which has paid  to the company as per work done while the construction company has a large sum outstanding against it to be paid to the labourers and petrol pump owners for which it has given undertaking before the district administration to pay within two months.

    As per the source, it will be better for the company financially to back out than to carry it on because in the former case, it will lose about Rs. 200 million to PEDO while in  the lather case it will suffer a huge loss of about Rs. 3 billion.

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