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Dulhasti Power Plant Case Study

This is a case study and analysis on the Dulhasti Dam Power Plant Project in India. It highlights those areas which experienced the big hits in the cost estimation procedures and what steps did the Indian Govt. take in order to sustain the budgetary perspective and complete the project.

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Dulhasti Power Plant Case Study

  1. 1. Dulhasti Power Plant Project Abstract Begun in 1985, the Dulhasti power project set in the northern Indian provinces of Jammu and Kashmir, is a renowned example of a disaster in project cost estimation and delivery. During the inception stage, the project’s cost was estimated to be 1.6 Billion Rupees (about $50 Million). By the time the contract was let, the cost estimates had risen to 4.5 Billion Rupees and later it rose to 8, 11, 16 and 24 Billion Rupees (nearly $750 Million). Till 2004, the project was not completed, although well over $1 Billion was spent, just pursuing it. This study and analysis highlights those areas which experienced the big hits in the cost estimation procedures and what steps did the Indian Govt. take in order to sustain the budgetary perspective and complete the project. Karthik Murali | EMGT 709 Western New England University March 2nd, 2013 karthik.murali@wne.edu
  2. 2. Case Study – Dulhasti Power Plant Project Contents Contents ......................................................................... 1 Summary......................................................................... 1 The Challenges................................................................ 2 Initial Challenge .............................................................. 3 Political Issues................................................................. 3 Geographical Issue ......................................................... 5 Project’s Frontier ............................................................ 6 Conclusion ...................................................................... 8 Appendix – Figures & Images ......................................... 8 Bibliography.................................................................... 9 Summary The idea of the project was a very straightforward concept. Dulhasti was designed as a 390MW hydroelectric power plant to be built on Chandra River, which is a swift-flowing tributary of the Chenab River in the Doda region, a rugged, mountainous section of the Himalayas, and several hundred kilometers form larger cities. The project dealt with, 1. Building a dam 2. Erect a hydroelectric generating station 3. String hundreds of miles of transmission lines The transmission lines were to be built in a way that they start near the headwaters of a system of rivers flowing onto the plain south of the mountain region. The contract of the project was finalized initially for $50 Million which led the contracting organizations anticipate that the project could be completed in a reasonable time frame. Adv. Engr. Cost Estimation | March 5th, 2013 1
  3. 3. Case Study – Dulhasti Power Plant Project The Challenges The driving factor that led to the decision of the construction of a hydro electrical power plant was the geographical plus points and the natural factors that acted as an added advantage. Mountains, rivers that were large enough to provide the water capacity to run a hydroelectric plant for Dulhasti dimensions were some of the naturally available support instruments. The following were the challenges observed during the progress of the project, Figure 1 Positives Challenges Although there were two strong positives i.e. anchoring points that led to the initiation of the project, the challenges ousted the advantageous factors of the overall proposition. The geographical plus points were not complementary to the problems the logistics would face and there were political issues with the neighboring country which indirectly led to additional costs. These problems eventually led to a huge time delay in the completion and delivery of the Dulhasti Power Plant. Adv. Engr. Cost Estimation | March 5th, 2013 2
  4. 4. Case Study – Dulhasti Power Plant Project Initial Challenge The contract for the power generation project was first awarded to a French Consortium. They immediately reverted and asked for an upward price revision. The Indian Govt. refused, having a doubt on the French Consortium that it had known all along that their initial bid was too low and were hoping to simply “buy” the project prior to renegotiating. Given that the Indian Govt. had refused the initial price quote revision, this resulted into a second bidding process. There was a wide competition from other European countries then in the field. However, the second bid offer by the French was surprisingly much lower than the first one. Although this process initially appeared to save the Indian Govt. a lot of money, it was not a good and smooth beginning to the partnership between the Govt. and the French Consortium. Political Issues The site selected for the project, unfortunately, came with some serious drawbacks. Jammu & Kashmir shares the border with Pakistan. As history being a strong and true witness, India and its neighboring country have had lot of problems. It is persistent from 1947, the year India got independence and experienced a partition with Pakistan. Jammu & Kashmir has been the epicenter of numerous and serious clashes between separatist forces supported by the Pakistan Govt. and the Indian Army units stationed in the region to keep the peace. The construction of a power plant in such a disputed area would certainly provoke some sort of a reaction by the nationalist groups, using terrorism as their chief means of opposition. Adv. Engr. Cost Estimation | March 5th, 2013 3
  5. 5. Case Study – Dulhasti Power Plant Project Figure 2 The power plant was to be constructed at the Kishtwar district in Jammu which is just a few miles away from the Indo-Pak border. The Kishtwar region is prone to external attacks and influences across the border. The construction of the dam would become an obvious target to the terrorists and it could end up endangering the nearby inhabited villages and the national roadways of India which is one of the prime sources for material transportation for the Indian Army. This led to the inclusion of additional charges of security for the site and the surrounding areas, and it undoubtedly became prohibitively expensive. The initial estimation would have certainly not made any provision for security – around the site and the neighboring areas, this uncounted area must have gone rising till the final completion of the project. Adv. Engr. Cost Estimation | March 5th, 2013 4
  6. 6. Case Study – Dulhasti Power Plant Project The security has to be given right from the time the project work starts on the construction site and it has to be stabilized and continued even after the completion of the power plant in order to ensure that the massive effort put in does not go in vain. Geographical Issue As mentioned earlier, the construction site was situated in the mountainous region of Jammu & Kashmir provinces, the site was intended to capitalize on the proximity of the large river systems capable of providing the water capacity that was needed to run a hydroelectric plant of Dulhasti’s dimensions. The geographical challenge – creation of a large plant in a region that almost totally devoid of supporting infrastructure. This also included an adequate logistics network (roadways and railways). The ideology of building the power plant in the foothills of the Himalayas may sound flabbergasting and look very scenic when done, but it was absolutely not cost effective, particularly as almost all the supplies had to be brought in with air transportation metering up the cost bar exorbitantly. All the raw materials viz. cement, wood, stone and steel had to be hauled by helicopters for miles over snowbound areas. Not to forget, the climate conditions. It snows for more than half a year in Jammu and Kashmir and convincing labor (highest authority engineers to skilled laborers who do the hardcore jobs) to work in those conditions was impossible without paying them a fat packet of money each month. This also surpassed the initial estimation. Adv. Engr. Cost Estimation | March 5th, 2013 5
  7. 7. Case Study – Dulhasti Power Plant Project Project’s Frontier The following graph explains the project’s timeline in general. The power plant initiation to completion is spread over a span of 22 long years. The big impact on the project’s progress was due to the Kargil War (fought between India & Pakistan over seizing the territory of Kargil which lies in the Indian occupied Kashmir) that went on for more than 90 long days i.e. from May to August 1999. The impact was worsened since it was the same year the project underwent its second major revision with regards to structure, logistics and other important dynamics that were the active catalysts in the project. Figure 3 1985 1990 1995 2000 2005 2010 Project's Overall Span French Cosortium 1st Bid 1st Major Revision 2nd Major Revision Kargil War Effects French Consortium Backs Off New Contract Norwegian Co. There was more to come. After the Kargil War subsided; although the after effects were bad, the project had no time to recoil and gain a stable resumption. Adv. Engr. Cost Estimation | March 5th, 2013 6
  8. 8. Case Study – Dulhasti Power Plant Project The reason being the French Consortium which was in-charge of the whole program backed off. They had pulled out due to some major differences with the Indian Govt. over the cost and the work policy. This forced the Indian Govt. to reissue the bid and this time the project was awarded to a Norwegian Co. that led the project work with complete charge from the year 2002 till the completion of the completion i.e. the year 2007. The following graph shows the cost graph for the Dulhasti Power Plant. It started with an estimation of 50 Million $ in its year of inception and shows an exponential raise to 1.5 Billion $ till completion. This jump is enormous and disastrous at the same time as it becomes a vivid study for cost estimation failure and project delivery. Figure 4 Dulhasti Power Plant's Cost 1600 1400 in Million $ 1200 1000 800 600 400 200 0 1985 1987 1990 1995 2000 2002 2005 2007 Year The work on the plant continued in fits and starts for over 20 years. By the turn of the century, over $1 Billion had been spent on the Dulhasti project and the plant was still not operational. Further, in order to offset the expense of the project, the cost of power to be generated by the plant has risen by over 500%, making the plant an inefficient producer of electrical power for the countryside. Adv. Engr. Cost Estimation | March 5th, 2013 7
  9. 9. Case Study – Dulhasti Power Plant Project Conclusion The Dulhasti Hydroelectric Power Plant finally became operational on the 7 th of April, 2007. It has been generating 1907 Million units of electricity in a 90% dependable year. It is one of the major accomplishments for NHPC (National Hydroelectric Power Corporation) thereby building one of the most important HPPs in India, thus allowing for an integrated and efficient power development. The Dulhasti Power Plant serves eight states and the capital of India – Delhi, Jammu & Kashmir, Himachal Pradesh, Punjab, Haryana, Uttar Pradesh, Rajasthan, Chandigarh and Uttaranchal. Appendix – Figures & Images Exhibit Title Figure 1 SmartArt Diagram – Beam Balance Figure 2 Northern Provinces of India Figure 3 Project’s Timeline Figure 4 Dulhasti Power Plant Cost Graph Image Courtesy www.google.com/images Adv. Engr. Cost Estimation | March 5th, 2013 8
  10. 10. Case Study – Dulhasti Power Plant Project Bibliography 1. Blog, H. (2010, October 29th). Issues and Problems in Hydro Power Development in India. Retrieved from HydroPowerStation.Com: http://hydropowerstation.com/?tag=dulhasti-hydroelectric-project 2. Engineering, T. (2007, Apri 10). Dulhasti Dam & Hydro Electric Power Project. Retrieved from Tractabel-Engineering: http://www.tractebel-engineeringgdfsuez.com/reference/dul-hasti-dam-and-hydroelectric-power-project/ 3. Govt. of India. (2007). Project Implementation Status Report of Central Sector Projects. Infrastructure and Project Management Division. New Delhi: Ministry of Statistics and Programme Implementation. 4. Knowledge, M. H. (2012, November 7th). Working Challenges in Adverse Geological Conditions. Retrieved from Blogspot.Com: http://mmmhydropower.blogspot.com/2012/11/working-challenges-inadverse_8814.html 5. NHPC. (2008). Dulhasti Power Plant Project. Kishtwar, Jammu & Kashmir, India. Retrieved from http://www.youtube.com/watch?v=q9A6kbDdQKk 6. Parihar, P. (2010, February 10th). Kishtwar - Ek Jannat. Retrieved from Blogspot.Com: http://mykishtwar.blogspot.com/2010/02/dul-hasti-project.html 7. PM News Bureau. (2005, December 5th). Dulhasti Project by March 2006. Retrieved from Project Monitor.Com: http://www.projectsmonitor.com/detailnews.asp?newsid=10119 8. Rocky, R. (2007, April 7th). Dulhasti - A Ray of Hope for the Dark J&K. Retrieved from Indian Express.Com: http://www.indianexpress.com/news/dulhasti-a-ray-of-hope-for-dark--jk/28049/0 Adv. Engr. Cost Estimation | March 5th, 2013 9

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This is a case study and analysis on the Dulhasti Dam Power Plant Project in India. It highlights those areas which experienced the big hits in the cost estimation procedures and what steps did the Indian Govt. take in order to sustain the budgetary perspective and complete the project.

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