Reports that Pakistan may cancel the power-generation component of the Diamer-Bhasha Dam have raised questions about the future of one of the country’s major infrastructure projects, as hydropower and water-storage schemes face persistent delays, rising costs, and financing and implementation challenges.
According to the Auditor General of Pakistan’s 2025-26 report, the combined financial exposure associated with the Dasu Hydropower Project, Diamer-Bhasha Dam, and Neelum Jhelum Hydropower Project has reached Rs3.9 trillion, reflecting delays, land acquisition problems, design revisions, and operational failures.
Against this backdrop, BRIEFPK reported on Substack that the Pakistani government had decided to cancel the power-generation component of Diamer-Bhasha Dam, retaining the project as a water-storage facility. The report cited an internal memorandum from the Economic Affairs Division conveying the Power Division’s position that the government should prioritize the reservoir while postponing the infrastructure required for electricity generation and transmission.
The report quoted a source familiar with the decision-making process as saying the move followed lobbying by independent power producers (IPPs), which, according to the source, receive substantial payments even when their plants generate little or no electricity. However, Pakistan’s Power Division rejected the report on August 29, describing it as “fake news,” leaving the future of the power-generation component disputed between the official account and information contained in the leaked document.
According to BRIEFPK, the internal memorandum warns that postponing the installation of water intakes, isolation gates, tunnel stubs, and other waterway structures until after the reservoir fills could make their completion exceptionally risky and expensive. Such work could require complex engineering operations alongside a full reservoir, including underwater excavation or “lake tapping,” techniques rarely attempted on this scale.
Although completing the project would not be technically impossible, the process could become so costly and dangerous that future governments might be unwilling to authorize it, raising concerns that a temporary postponement could effectively become a long-term suspension of the power-generation component.
The memorandum reportedly links the prioritization of water storage to the rapid growth of rooftop solar installations, declining electricity demand, excess generation capacity, and uncertainty over the country’s needs during the coming decade. It also points to a lack of financing for the power-evacuation system, estimated to cost around $2 billion, and suggests that investing between $2 billion and $3 billion in additional water storage may be more practical than completing the power-generation component.
Despite the dispute over the project’s future, official plans continue to include provisions for electricity generation at Diamer-Bhasha. The draft 2025-35 generation plan schedules the dam’s 12 units between 2032 and 2035, while the Water and Power Development Authority (WAPDA) continues to advertise the project’s capacity at 4,500 megawatts. In February, the authority also said construction activities included a power intake facility.
BRIEFPK argues that keeping the project in long-term plans does not necessarily rule out the cancellation of its power-generation component, but may instead reflect uncertainty over how the decision is being implemented, with the project retained on paper while funding for generation and transmission facilities is deferred. This discrepancy raises questions about the alignment between official planning and available financing, particularly as postponing essential components could increase future completion costs or make restoring the original design economically unviable.
The challenges facing Diamer-Bhasha extend beyond the dispute over electricity generation to the construction of the dam itself, which has encountered delays, land acquisition problems, and repeated design revisions. According to the Auditor General’s report, physical progress stood at just 19.95%, compared with financial progress of 39.67% and a target of 57.78% for fiscal year 2024-25.
The original approved cost of the main dam construction was Rs479 billion. The report said Rs151 billion had been spent on land acquisition and resettlement against a revised budget of Rs149 billion. Meanwhile, the future power-generation facilities, for which a contract has not yet been awarded, require an estimated investment of Rs1.424 trillion.
The Auditor General reported that cumulative expenditure on the dam component had reached Rs190.305 billion by June 2025, against an awarded contract price of Rs442.403 billion for the joint venture between Power China and the Frontier Works Organization. The project has also failed to acquire all the required land despite 17 years having passed, with 3,134 acres still outstanding out of a revised requirement of 35,924 acres.
The reported irregularities include unauthorized cash transfers to private bank accounts belonging to land acquisition officials, irregular allowances, and repeated design revisions after contract awards. These issues have contributed to delays beyond the June 2027 deadline for completing the dam component. In May, Deputy Chairman of the Planning Commission Ahsan Iqbal expressed concern that a revised PC-I project document had not been submitted in six years, despite a sharp increase in costs from the original approved amount of Rs480 billion in 2018.
The difficulties facing Diamer-Bhasha reflect broader challenges across Pakistan’s water and energy sectors, where other major projects are under similar pressure from funding shortages, rising construction costs, and implementation delays. These include the Dasu Hydropower Project, Neelum Jhelum, and Mohmand Dam, all of which face financial and operational difficulties as the need for investment in water storage and energy infrastructure continues to grow.
Estimates of the time required to complete some projects have raised further concerns about whether current financing arrangements can meet the country’s development needs. The Kachhi Canal Project is expected to take more than a century to complete, while Karachi’s K-IV water supply scheme may require another decade before becoming operational. Official estimates cited by the report suggest that the Naulong Dam could take 122 years to complete, while the Chashma Right Bank Canal could require nearly 1,900 years under the existing financing structure.
As the dispute over the future of Diamer-Bhasha’s power-generation component continues, figures on physical progress, costs, and delays point to challenges that extend beyond a single government decision. The future of Pakistan’s water and energy projects will depend on the government’s ability to secure financing, address administrative shortcomings, and turn announced plans into completed and operational infrastructure.
