MHP cost shoots up to 45 billion

Hydropower: The construction cost of Mangdechhu Hydropower Project (MHP) is going to escalate to Nu 45 billion when the project completes by its rescheduled deadline in March 2018.

The cost of the project was initially estimated at Nu 28.96 billion. The project is also delayed by six months, pushing back its earlier commissioning schedule of September 2017 to March 2018.

While the revised project cost calculated on March 31, 2015 price level was Nu 42.81 billion, it is however going to ratchet up to Nu 45 billion by March 2018 – 64 percent rise in cost.

MHP reported 25 percent cost escalation in June 2013. From the initial cost of Nu 28.96, it rose  to 37 billion.

The following year, the project reported new cost escaltion by 40 percent, taking the cost to Nu 41 billion, which further rose to Nu 42.81 billion by March 2015.

Managing director of MHPA  A K Mishra said the project cost is likely to increase by 30 percent by March 2018.

“The total cost rise at completion would be around 64 percent, out of which 30 percent is from annual inflation,” A K Mishra said. Rest of the 34 percent escalation is from variations, extra and new items, which weren’t reflected in DPR but was implemented as the project requirement.

MHP rescheduling was done by the project considering the genuine initial delay. The project, however, doesn’t consider it a delay.

“The project is being carried out as per DPR construction schedule at optimum time and cost per MW within the SAARC region,” said A K Mishra.

According to MHP, the project construction period is 6 years in DPR. And additional one year is given for infrastructure development works.

A K Mishra said that MHPA is being constructed within the time schedule and the initial delay of six months happened due to late signing of agreement with its consultant, National Hydroelectric Power Corporation.

“Therefore, the schedule of the Project is still six years only. The delay that took place in the beginning is being considered now,” A K Mishra said.

During a visit to the project, economic affairs minister Norbu Wangchuk said that MHPA is a benchmark project in SAARC when it comes to cost and its construction schedule. “Our objective and target is to complete MHP as the most cost-efficient and time-scheduled project in the South Asian region, which could be a model for emulation for other projects.”

A K Mishra said that cost escalation to Nu 45 billion is not due to six months’ delay.

“Project of Mangdechhu size in India cost about Nu 90 million per MW. While the Mangdechhu’s cost, even by March 2018, is only Nu 65 million per MW,” A K Mishra said. “This project shall be referred in future for its best practices.”

In 2013, project cost of Punatsangchhu I and II were also proposed for revision. The project cost of 1200 MW Punatsangchhu I was projected at Nu 110 billion from initial cost of Nu 94 billion. And for the 1020 MW Punatsangchhu II, cost rose to Nu 75 billion from estimated Nu 54 billion.

DGPC in its report hinted at the likelihood of an increase in the tariff rates of these projects because of construction cost escalation. In its proposal, DGPC estimated tariff of Punatsangchhu I to be around Nu 3.50 per unit. And tariff rates for Punatsangchhu II and Mangdechhu is expected to be Nu 3 per unit.

According to its report, but both project costs and tariff rates are subject to further increase, in which case electricity could become dearer for domestic consumers.

By Tempa Wangdi, Trongsa

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