A.   General

The Government of Pakistan in March 1994 announced the Policy Framework and Package of Incentives for private sector power development in the country. It received a tremendous response albeit for all Thermal Plants. GOP now intends to encourage proposals for power generation based on indigenous resources namely its hydel resources. Hydel power being cheaper, will provide tariff relief to the consumers, utilize indigenous resources, involve Pakistani entrepreneurs and provide benefits of economic growth to the relatively backward parts of Pakistan.

B.   The need for a separate Hydel Power Policy 

In Pakistan nearly all hydro potential results from discharges into the Indus River basin. Discharges result primarily from precipitation and snow-melt in the northern mountainous ranges of the country. Discharges take place in small rivulets coming further down to the bigger tributaries of River Indus and then to Indus River itself. The development of hydropower projects however, is characterized by remote locations and seasonal variations. Pakistan's climatic factors including rainfall and snowmelt, make it relatively easy to develop hydel generation during the months of July to December while the period January to June is extremely dry in terms of stream flow. In order, therefore, to arrest the risk of over development in summer months that would create an unbridgeable gap in winter months, the total requirement of hydel plants in private sector may be limited to 2,000 MW upto the end of the 9^th Five Year Plan. However, the limit of 2,000 MW will be reviewed at a later stage and can be enhanced to suit the national priorities and power demand growth. Realizing that these peculiarities of hydropower development necessitate special consideration the Government has devised an attractive policy package to evoke response of private sector similar to that of thermal power. The salient features of the policy framework and package of incentives devised for development of hydropower through private sector.