The government has denied that Diamer-Bhasha’s 4,500MW power component is being abandoned. But if the rumour proves true, the project’s economics and the justification offered to Pakistanis would change fundamentally.
Reports that the government had decided to proceed with Diamer-Bhasha as a water-storage dam while postponing or abandoning its power-generation component produced an unusually swift response. WAPDA, the Power Division and the Ministry of Economic Affairs all rejected the claim, describing it as false and misleading.
WAPDA says the Rs1.424 trillion power component remains approved, that power-related civil works will begin by June 2027 and that electromechanical work will follow by December 2027. It also maintains that the project’s intake structures and other essential power interfaces remain part of the dam’s design. For the moment, therefore, cancellation remains an unproven report contradicted by the government’s formal position.
But the controversy should not be dismissed as merely another social-media rumour. Even if the official denial is accurate, the report exposes a legitimate economic question: what would Diamer-Bhasha become if its turbines were removed or postponed indefinitely?
If that happened, Diamer-Bhasha would no longer be the integrated water-and-energy project presented to Pakistan; it would become a different asset with a different financial logic.
The central test, therefore, is not whether officials continue to describe Diamer-Bhasha as multipurpose. It is whether the engineering, financing and procurement decisions still preserve power generation as a real, funded and buildable part of the project. The economics of the combined project
Diamer-Bhasha has always been justified as a multipurpose national asset. It is designed to provide 6.4 million acre-feet of live water storage, regulate irrigation supplies, mitigate some downstream flood risk, reduce sediment reaching Tarbela and generate 4,500MW of electricity.
WAPDA estimates direct generation of approximately 18.1 billion units annually. Regulation of river flows could produce another 2.52 billion units at existing downstream power stations, while sediment control is expected to extend Tarbela’s useful life by about 35 years.
The latest reported financing plan places the combined cost of the dam, reservoir, land, resettlement and power facilities at approximately Rs2.65 trillion, equivalent to about $9.85 billion. That sits against a sharply rising cost base: the dam component was originally approved at about Rs479.7 billion, was reported in the National Assembly at roughly Rs1.049 trillion in December 2024, and has more recently been reported at about Rs1.122 trillion—an increase of around 134 per cent over the original estimate. Of the combined figure, around Rs1.224 trillion is assigned to the dam, reservoir and land components, while Rs1.424 trillion relates to power generation. A separate electricity-evacuation system may cost approximately another $2 billion, although its final design and financing have not been publicly settled. That arithmetic explains why the cancellation question is not procedural but economic.
The reported escalation makes the trade-off sharper. Dropping the power facilities and transmission system could avoid close to Rs2 trillion in additional investment. In a country facing severe fiscal and external-financing constraints, that saving would be material. But after a roughly 134 per cent rise in the dam component’s reported cost, it would also leave Pakistan with a much more expensive non-power asset and remove the project’s most direct source of cash revenue. That is where the financial case weakens.
At the FY2024–25 average energy-purchase cost of approximately Rs9 per unit, Diamer-Bhasha’s direct electricity would have a gross value of roughly Rs163 billion annually. If it displaced imported RLNG generation costing Rs19–28 per unit, the annual economic value could range from about Rs350 billion to Rs510 billion. The actual value would depend on dispatch timing, the plants it displaced and whether the transmission system could carry the power when needed.
A reasonable middle range would place its direct annual energy value at approximately Rs220–360 billion, before operating expenses and financing costs. A water-only dam would retain important social benefits, but it would lose the revenue stream most capable of servicing the project’s debt. Hydropower is inexpensive but not free. Supporters sometimes describe Diamer-Bhasha’s future electricity as almost free. That is misleading. The water may carry no fuel cost, but the dam, tunnels, turbines, powerhouses, financing and transmission network must still be paid for.
An illustrative calculation suggests that the power facilities alone could produce electricity for approximately Rs7–10 per unit. Including the reported transmission requirement raises that range to around Rs10–14. If the entire cost of the dam, land, powerhouses and transmission were charged exclusively to electricity, the figure could rise to approximately Rs16–23 per unit.
The proper economic cost lies somewhere between these ranges because part of the dam’s expenditure should be assigned to irrigation, water security, flood management and sediment control.
That makes Bhasha power competitive with imported coal and RLNG, but not automatically cheaper than every solar, wind, local-fuel or energy-efficiency alternative. Pakistan’s latest generation-planning model illustrates the issue. It included Diamer-Bhasha as a strategic project but calculated a roughly $3 billion gap between its assumed full cost and the cost at which it would enter a strictly least-cost electricity plan.
That gap does not prove the project is uneconomic. It means the non-power benefits must be worth at least several billion dollars for the combined project to beat the alternatives. Pakistan has yet to publish a current, independently reviewed calculation demonstrating that value. Why a water-only dam is financially weaker
Storage, irrigation reliability and flood protection can create enormous value for the national economy. They do not, however, automatically generate cash for WAPDA.
Farmers generally do not pay the full economic value of stored water. Flood damage avoided does not appear as project revenue. Extending Tarbela’s life creates a national benefit, but it does not necessarily provide Diamer-Bhasha with a dedicated income stream.
If that happened, Diamer-Bhasha would no longer be the integrated water-and-energy project presented to Pakistan; it would become a different asset with a different financial logic.
Consequently, a water-only project could remain socially and strategically worthwhile while becoming financially dependent almost entirely on taxpayers and government borrowing.
The distinction matters because Diamer-Bhasha already faces a reported foreign-financing gap of approximately $3.5 billion. WAPDA’s existing $500 million dollar bond carries a 7.5 per cent interest rate and matures in 2031, potentially before any new powerhouse could begin earning revenue.
If power generation were removed, the government would need to explain how the remaining dam would repay its debt or why the public value of water storage justified financing it as a largely non-revenue public asset.
It would also need to acknowledge that a reservoir does not create new river water. It stores water in one season for use in another and improves reliability only if the wider irrigation system can deliver that water efficiently. Its agricultural benefit therefore depends on canal capacity, provincial allocations, cropping decisions, irrigation efficiency and water governance. “Later” must have an engineering meaning
There is also a crucial difference between staging the power component in a technically credible sequence and delaying it in a way that quietly makes it impossible. If Pakistan genuinely intends to install the turbines later, the necessary intake structures, isolation gates, embedded steel, tunnel connections and access works must be constructed while the site remains dry. Omitting them now could make retrofitting power facilities after reservoir filling exceptionally expensive and technically risky.
Therefore, the most important evidence will not be another press statement. It will be issued construction drawings, procurement documents, budget allocations and visible work at the site.
If WAPDA awards the MW-2 power civil package by June 2027, preserves the complete intake and waterway interfaces and arranges transmission financing, the cancellation report will have been disproved in practice. If those commitments continue to slip, public concern will be justified regardless of the terminology officials use.
The report that triggered the controversy also alleged that lobbying by existing independent power producers influenced the decision. No publicly available evidence currently establishes that allegation, and it should not be repeated as fact. There are already sufficient economic reasons for an honest policy debate: Pakistan has excess contracted capacity, enormous capacity payments, weak electricity demand, rapid rooftop-solar adoption, inadequate transmission and very limited access to affordable foreign finance.
But it would be economically perverse to preserve expensive, imported-fuel generation merely because the country is contractually obliged to pay for it while abandoning a long-lived indigenous hydropower asset. The correct comparison is not simply “Bhasha versus no Bhasha.” It must include the cost of retaining or retiring existing plants, the future demand curve, solar and battery deployment, transmission constraints and the value of dispatchable generation after sunset.
The government should therefore publish one consolidated appraisal showing:
• The updated cost of the dam, powerhouses and transmission network;
• The economic case with and without power generation;
• The value assigned to irrigation, flood protection and sediment control;
• Dry-year and climate-change hydrology scenarios;
• The remaining financing requirement and borrowing terms;
• The exact power-interface works included in the current dam contract; and
• The effect on electricity tariffs and capacity payments.
Until that information is available, neither sensational reports nor blanket official denials can settle the economic question..If the rumour is false, the government can prove it through contracts, financing and construction. If it is true, Diamer-Bhasha should be returned for a fresh economic appraisal.
A water-storage dam may still be strategically justified. But a dam without its planned 4,500MW power system is not merely the same project delivered in phases. It is a fundamentally different asset, with fewer monetisable benefits, a heavier fiscal burden and a more difficult economic case.
Pakistan did not approve only a concrete wall across the Indus. It approved an integrated water-and-energy project. If half of that bargain is removed, the decision must be explained—and economically justified—to the people expected to pay for it.