Pakistan on Monday approved the construction of Diamer-Basha Dam at an initial estimated cost of Rs625 billion. It will mostly be funded through local resources after international financial institutions and China showed reluctance to help the country build the reservoir.The Central Development Working Party (CDWP) cleared the project for the final approval of Executive Committee of National Economic Council (ECNEC), according to the Ministry of Planning and Development. Headed by Planning Commission Deputy Chairman Sartaj Aziz, the CDWP also cleared the Rs303 billion Mohmand Dam Hydropower Project for the final approval of the ECNEC.With a cumulative cost of Rs928 billion, these projects will help the country address two serious issues – water shortage and power generation. The Mohmand Dam project will have power generation capacity of 800 megawatts. Diamer-Basha Dam project is only being built as a water reservoir for now, as the government initially excluded the power generation component, which would cost another Rs744 billion.The total cumulative cost of Diamer-Basha Dam will be minimum Rs1.4 trillion once power generation facilities are accounted for.This is very big decision and the government will fund the dam by providing money from the budget, while the Water and Power Development Authority will arrange commercial financing, Aziz told The Express Tribune. He said that under the new Water Policy, the Planning Commission has recommended enhancing the water sector allocations and the funds required for the construction of the dam can easily be provided.The government will be required to provide around Rs48 billion per annum for the construction of the dam.The federal government will provide Rs370.2 billion from the budget in a grant, which will cover 57% of the cost. Wapda will raise Rs115.9 billion from its own sources as an equity investment, and the authorities will borrow Rs163.3 billion in commercial loans, according to the project document.In past 17 years, almost every head of state and the government has performed the groundbreaking ceremony of the project but civil work could not begin due to lack of financial resources.Out of the total Rs625 billion total cost, which includes interest during construction, the local rupee component is Rs472 billion and Rs153.2 billion is the foreign exchange component to be arranged from abroad. The project will be completed in five years.An amount of Rs138 billion has been separately approved for land acquisition and resettlement. Most of this work has already been done and the government has spent Rs58.3 billion on land acquisition. An amount of Rs53.5 billion has additionally been approved for resettlement.An amount of Rs269 billion has been approved for civil works. The Karakorum Highway (KKH) relocation will cost Rs56.9 billion.The Council of Common Interests –the highest constitutional body dealing with Centre and provinces issues, unanimously approved the Diamer-Basha Dam project in July 2010.The project has been divided into two parts to reduce the size of the project and financing requirements after World Bank, Asian Development Bank and China refused to fund the project. Pakistan has been struggling to raise money from international institutions amid Indian opposition to the project.Pakistan had withdrawn its request to include the Rs1.4 trillion Diamer-Bhasha Dam in the China-Pakistan Economic Corridor (CPEC) framework after Beijing placed strict conditions including ownership of the project, according to Wapda Chairman Muzammil Hussain on Tuesday. “Chinese conditions for financing Diamer-Bhasha Dam were not doable and against our interests,” said Hussain while briefing the Public Accounts Committee (PAC) in November.In order to facilitate early implementation of the project, WAPDA has been entrusted to have overall control and implementation responsibility of the project. The WAPDA will be responsible for dam construction and the National Highway Authority has been tasked to relocate parts of the Karakoram Highway that will submerge in the water.The project will contribute to the alleviation of acute water shortages in the Indus Basin Irrigation System caused by progressive siltation of existing reserves. After the completion of the dam, the storage capability of Pakistan will increase from 30 days to 48 days.The powerhouse, when completed, is expected to add 4,500 megawatts of electricity generation capacity.Pakistan has not built any major water reservoir since Tarbela Dam and Mangla Dam were built in the 1960s.