A flagship power project meant to secure Pakistan’s water rights and cheap electricity has instead become one of the state’s most expensive liabilities.
The Auditor General of Pakistan has found that the Neelum Jhelum Hydropower Project bled more than Rs. 128 billion during fiscal year 2024/25 alone, a scale of loss that auditors have tied directly to prolonged shutdowns, unresolved tunnel collapses and years of mismanagement.
Losses Pile Up as Powerhouse Sits Idle
According to the audit report, the 969 megawatt facility recorded a net loss of Rs. 29.41 billion for the year. Far more damaging was the business interruption loss of Rs. 99.18 billion, racked up after the powerhouse was forced offline.
The prolonged shutdown of the facility has resulted in a cumulative loss of Rs128 billion over the past two years, with the project incurring an annual net loss of Rs29 billion while losses from the suspension of operations reached Rs99 billion.
The shutdown itself is the product of two separate structural failures. The tailrace tunnel collapsed in 2022, and before repairs could stabilise the system, the headrace tunnel gave way in May 2024.
The 969MW plant has remained offline since May 2024 following tunnel collapses, with inquiries into the incidents still incomplete. Years after the first collapse, there is still no formal accounting of what went wrong or who is responsible.
Uninsured Assets and a Failure to Act
Auditors did not stop at the headline loss figure. The report found that project management failed to fix known technical defects, let critical insurance cover lapse, and never pursued compensation for the damage caused by the tunnel failures.
Assets worth Rs. 267 billion sat uninsured through the review period, a gap that leaves the national exchequer exposed if further structural problems emerge.
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This is not the first time inspectors have flagged weak oversight at Neelum Jhelum. A separate performance audit covering an earlier period concluded that the project’s contractors also failed to meet basic obligations.
Contractors failed to meet obligations, such as supplying critical spare parts, while multiple construction faults including collapses in the tailrace and headrace tunnels kept the project non operational for long periods.
Generation Targets Missed Every Single Year
The project was built to deliver 5,150 gigawatt hours of electricity annually. It has never hit that number, not even in years when all four generating units were technically functional.
Compounding the shortfall, the project has operated for years without a reference tariff approved by the National Electric Power Regulatory Authority, or NEPRA. The absence of an approved tariff alone cost the project an estimated Rs. 77.35 billion in regulatory revenue.
The scale of that particular shortfall lines up with figures reported elsewhere in the audit cycle. The report states that the project’s inability to secure tariff approval has led to an additional revenue shortfall of Rs77.346 billion.
Two different failures, tunnel collapses on one side and regulatory paralysis on the other, have combined to strip the project of the revenue it was designed to generate.
A Balance Sheet in Freefall
The financial picture only worsens on closer inspection.
As of June 30, 2025, current liabilities exceeded current assets by Rs. 307.89 billion, driven largely by defaults on debt repayments and the reclassification of long term loans into current liabilities.
Current liabilities exceed current assets by Rs307.894 billion, highlighting the project’s deteriorating financial position.
Recovery of the original investment has also stalled badly. Against an approved project cost of Rs. 418.89 billion, the project had recovered only Rs. 180.17 billion by the end of the fiscal year, a shortfall that pushes the payback timeline further out of reach.
Roughly 69 percent of receivables were overdue by more than 120 days, a signal of chronic cash flow strain rather than a one off setback.
Part of a Wider Pattern in Wapda’s Portfolio
Neelum Jhelum is not an isolated case within Wapda’s project portfolio. The same audit cycle flagged the Dasu Hydropower Scheme for a cost overrun exceeding 257 percent, and warned that shortcomings in long term planning across multiple hydropower projects could ultimately burden the national exchequer with liabilities running into the trillions.
Shortcomings in long term planning for projects including Dasu and Diamer Bhasha Dam, along with Neelum Jhelum, could impose a financial burden of nearly Rs3.9 trillion on the national exchequer.
Earlier audits of Neelum Jhelum told a similar story of delay and cost escalation even before the latest tunnel collapse.
A prior performance audit found the project’s cost had already ballooned from an original estimate of roughly Rs. 84.5 billion to over Rs. 419 billion, and that its payback period had stretched from a planned five years to twelve.
The project was delayed by almost eight years, raising its cost from Rs84.502bn under the first revised PC1 to Rs419.454bn, a cost overrun of Rs334.952bn. Seen against that backdrop, the latest Rs. 128 billion figure looks less like a single bad year and more like the continuation of a decade long trend.
What the Findings Mean Going Forward
The AGP’s conclusion is blunt: persistent underperformance in power generation, prolonged outages, delayed tariff approvals, rising debt and weak risk management have together prevented Neelum Jhelum from meeting either its financial or operational goals.
With the headrace tunnel inquiry still open more than a year after the collapse, and no clear timeline for the powerhouse to resume full operations, the losses are likely to keep climbing before they level off.
For a project originally justified on national security grounds, tied to Pakistan’s water rights claim over the Neelum and Kishenganga rivers, the audit paints a picture of an asset that has struggled to deliver on almost every front it was built for.
The question now facing Wapda and federal authorities is whether accountability will follow the paper trail, or whether the project will simply add another line item to Pakistan’s growing catalogue of stalled infrastructure.
Do you think Pakistan’s power sector needs an independent accountability mechanism for mega projects like Neelum Jhelum, or is the current audit process enough to force real change?
