1. INTERNATIONAL FINANACE CORPORATION (IFC)
A Study on:
PRODUCTIVE USES OF HYDROPWER
In Gilgit-Baltistan, and Chitral District of Pakistan
By:
Alasdair Miller
Izhar Hunzai
Islamabad – February 2013
2. ii
TABLE OF CONTENTS
PART ONE: INTRODUCTION AND CONTEXT..........................................................1
1. BACKGROUND AND PURPOSE OF STUDY.............................................................................2
2. CONTEXTUAL ANALYSIS................................................................................................................2
PART TWO: ANALYSIS OF POTENTIAL SECTORS .................................................7
1. OVERVIEW.............................................................................................................................................8
2. RENEWABLE ENERGY......................................................................................................................8
3. MINERAL RESOURCES..................................................................................................................13
4. HIGHVALUE AGRICULTURE......................................................................................................16
5. TOURISM..............................................................................................................................................25
PART 3: INVESTMENT PROPOSAL........................................................................ 28
1. INTRODUCTION...............................................................................................................................29
2. GOAL AND STRATEGY...................................................................................................................29
3. INVESTMENT PROJECTS..............................................................................................................29
4. HYDROPOWER FOR PRODUCTIVE USES............................................................................30
5. BORDER-ECONOMY CLUSTER AT GOJAL, HUNZA.........................................................32
6. ESTABLISHING A MODEL MARBLE QUARRY...................................................................35
7. MEAT PROCESSING........................................................................................................................42
8. HORTICULTURE SECTOR............................................................................................................45
9. GREEN ECONOMY CLUSTER, CENTRAL HUNZA..............................................................45
10. TOURISM AND NATURAL STONE CLUSTER, SHIGAR, BALTISTAN...................47
11. OTHER PURE ACTIVITIES........................................................................................................49
12. GEMS AND JEWELRY CLUSTER, GARAM CHASMA, CHITRAL...............................49
13. FEED-IN TO MINI GRID IN CHITRAL TOWN...................................................................51
14. CONCLUSION...................................................................................................................................51
REFERENCES................................................................................................................................................52
ANNEXES........................................................................................................................................................53
3. iii
LIST OF TABLES
Table 1: GBC Population ..................................................................................................3
Table 2: Literacy Levels in GBC (2008)............................................................................. 4
Table 3: Selected Health Indicators.................................................................................... 5
Table 4: Trade and Industry Sector in Gilgit-Baltistan......................................................... 5
Table 5: Location of off-farm workforce: 2005 (%)............................................................. 6
Table 6: Installed capacity and Demand (MW) GB and Chitral 2012....................................9
Table 7: Tentative Cost of Power Units ............................................................................ 10
Table 8: Mineral resources of GBC.................................................................................. 14
Table 9: Seed Potato produced through Tissue Culture lab, in GB...................................... 17
Table 10: Total Value of Fruits Produce in GB (000 PKRs)............................................... 19
Table 11: Average Household Forest Tree Holding in 2008 - By Species ........................... 19
Table 12: Wholesale Supply of Dry Fruit (PKR million) ................................................... 21
Table 13: Recommendations and Action Points ................................................................ 27
Table 14: Summary of Business Clusters.......................................................................... 30
Table 15: SWOT Analysis............................................................................................... 30
Table 16: Profile of Five MHP Projects............................................................................ 31
Table 17: SWOT Analysis............................................................................................... 33
Table 18: Inventory of Resources in Gojal........................................................................ 34
Table 19: Comparison of Energy Consumption for Marble Extraction and Processing......... 37
Table 20: Comparison of Energy Cost for Marble Extraction and Processing...................... 37
Table 21: Misgar Hydropower Plant ................................................................................ 37
Table 22: Energy Production, Demand and Pricing Structure (in '000 kWh) ....................... 38
Table 23: Marble Quarry and Processing Unit - Input Variables ................................. 39
Table 24: Marble Production and Processing - Capital Expenditure ............................ 40
Table 25: Marble Quarry and Processing Unit - Profit & Loss (Income Statement) ............. 41
Table 26: Meat Processing - Input Variables..................................................................... 43
4. iv
Table 27: Meet Processing Unit - CAPEX........................................................................ 44
Table 28: Meat Processing - Profit & Loss (Income Statement) ......................................... 45
5. v
LIST OF FIGURES
Figure 2: Per Capita Income.............................................................................................. 4
Figure 3: Vegetable supplies to local markets ................................................................... 22
Figure 4: Export of fresh fruit to national market .............................................................. 22
Figure 5: Annual Export of Potato from GB to Down Country........................................... 23
Figure 6: Down Country Exports from GB ....................................................................... 23
Figure 7: Trends in Pakistan's Exports and Imports Through Sost Customs......................... 24
6. vi
Acronyms
ADB Asian Development Bank
AEDB Alternative Energy Development Board
AJK Azad Jammu and Kashmir
AKCSP Aga Khan Culture Services Pakistan
AKDN Aga Khan Development Network
AKFED Aga Khan Foundation Economic Development
AKRSP Aga Khan Rural Support Programme
CDM Clean Development Mechanism
CEP Clean Energy Program
CSOs Civil Society Organisations
DFP Dried Fruit Project
EC European Commission
ELC Electric Load Controller
FATA Federally Administered Tribal Areas
FATA Federally Administered Tribal Areas
FLO Fair Labeling Organisation
GAP Green Alternate Energy
GB Gilgit-Baltistan
GBC Gilgit-Baltistan and Chitral
GBGMA Gilgit-Baltistan Gemstone and Mineral Association
GBLA Gilgit-Baltistan Legislative Assembly
GEF Global Environment Facility
GNP Gross National Product
GoP Government of Pakistan
GTZ/GIZ German International Cooperation
GW/h Giga Watt per hour
HF Hashoo Foundation
ICIMOD International Centre for Integrated Mountain Development
IFC International Finance Corporation
InWent German International Capacity Building Agency
IPPs Independent Power Producers
IPS Industrial Promotion Services
IUCN International Union for Conservation of Nature
J&K Jammu and Kashmir
JICA Japan International Cooperation Agency
KADO Karakoram Area Development Organisation
KfW German Development Bank
KKH Karakoram Highway
KNR Karakoram NaturalResources Pvt. Ltd.
KPK Khyber Pakhtoonkhwa
KVO Khunjerab Village Organisation
LSO(s) Local Support Organisation(s)
MAG Marble Association of Gojal
MFL Mountain Fruit (Pvt.) Limited
MHP Micro Hydel Project
MOU Memorandum of Understanding
MW Mega Watt
NAGMA Northern Areas Gemstone and Mineral Association
NASSD Northern Areas Strategy for Sustainable Development
NGO Non-Governmental Organisation
NSTC North-South trade Corridor
7. vii
PASDEC Pakistan Stone Development Corporation
PKR Pakistani Rupees
PPAF Pakistan Poverty Alleviation Fund
PPI Productive Physical Infrastructure
PPP Public Private Partnership
PURE Productive Uses of Renewable Energy
R&D Research & Demonstration
RETs Renewable Energy Technologies
RF Rupani Foundation
SBA Sustainable Business Advisory
SDC Swiss agency for Development Cooperation
SDP Seed Development Project
SHYDO Sarhad Hydel Development Organisation
SRSP Sarhad Rural Support Programme
TAP Trade Authority of Pakistan
UAE United Arab Emirates
UNDP United Nations Development Programme
USD United State Dollars
USDA United States Department of Agriculture
USGS United States Geological Survey
W&PDD Water and Power Development Department
WAPDA Water and Power Development Authority
WSE Women’s Social Enterprise
XAAS Xinjiang Academy of Agricultural Sciences
9. 2
1. BACKGROUND AND PURPOSE OF STUDY
This study, conducted for the International Finance Corporation (IFC), a member of the
World Bank Group, investigates potential economic impact of hydropower development
on a range of productive activities in Gilgit-Baltistan and Chitral (GBC)1
, a remote and
under developed mountain region of Pakistan. The study is intended to contribute to the
design of an investment project for IFC’s Clean Energy Program (CEP), managed under
its Sustainable Business Advisory (SBA).
A key partner in this project would be Aga Khan Rural Support Programme (AKRSP), a
flagship program of the Aga Khan Development Network (AKDN). AKRSP is working
with rural communities in GBC since 1983, and has a track record in promoting rural
infrastructure and natural resources management. Under this program, AKRSP has been
developing community-based micro and mini hydropower projects since 1991 mainly to
meet basic energy needs at the household level and limited productive uses. It is also
implementing a Clean Development Mechanism (CDM) project in the small
hydropower category.2
The purpose of this study is to identify productive sectors, which can be developed
through sufficient energy input, technology and skill up gradation and market linkages,
as a new strategy for growth and poverty reduction in these underdeveloped areas. The
basic concept is to exploit existing potential for hydropower development in GBC,
which is well known, as a means to developing other promising resources and value
chains, such as horticulture, minerals, tourism and other productive uses of renewable
energy (PURE).
As an entry point, the study identifies specific sites for developing five mini hydropower
projects (MHPs), and a range of potential enterprises and market-based opportunities for
promoting PURE at these locations. It is an innovative approach and builds on previous
energy development and PURE initiatives of AKRSP, where the main focus was on
meeting basic energy needs only. Under this approach, energy becomes a key input to a
targeted investment strategy intended to catalyze market-led growth through productive
value chains.
2. CONTEXTUAL ANALYSIS
2.1 Ecology and human settings
The context is geographically remote, ecologically fragile and socioeconomically
marginalized mountain valleys of GBC in northern Pakistan.
The insufficient provision of energy,
despite high potential for clean
hydropower, forces people to cut alpine
trees and other vegetation to meet their
basic energy needs. The use of diesel and
other fossil fuels has also increased both
by small businesses and power utilities.
The GBC region stretches over a difficult
mountain area of 74,400 sq. km hemmed
1
GBC is not a formal name, and used here as a convenient geographical description of two separateadministrative
units: Gilgit-Baltistan (GB) and Chitral District of Khyber Pakhtoonkhwa(KPK)
2
http://cdm.unfccc.int/Projects/DB/DNV-CUK1204739473.81/view
Figure 1: Map of GBC
10. 3
between Afghanistan, Western China, Pakistan, and both parts of disputed Jammu and
Kashmir (J&K). Historically, the region was ruled as a collection of independent states
by feudal chieftains, known as Mirs, Mehtars and Rajas. European explorers came to
this area in the early 19th Century. Gilgit Agency was established under British rule in
1878, and Chitral was briefly occupied towards the end of that Century. However, local
rulers retained their autonomy well after British rule. Hunza, the last of these states was
formally abolished in 1974.
In 1947, the outgoing British Administration handed Gilgit Agency over to the
Maharaja of Kashmir, who joined India, while the Mehtar of Chitral opted for Pakistan.
Shortly after partition, the Gilgit Scouts revolted against the Maharaja with the intention
to join Pakistan. However, owing to wider political considerations, Pakistan did not
formally annex Gilgit-Baltistan (GB) and continues to view it as part of the larger
disputed region of Kashmir with India. GB has since been ruled by Islamabad as a
special administrative entity.
Recently, GB has received greater political and administrative autonomy from the
Centre, and reconstituted as a devolved administrative unit with the status of a de facto
province, but still without full constitutional rights. The
unsettled political status has served as a key barrier on large-
scale investments in GB. For instance, the Asian Development
Bank (ADB) has recently pulled out of an earlier
understanding to finance the Diamer-Basha Dam, under
pressure from India.
The adjoining Chitral district is part of Khyber-Pakhtoonkhwa
(KPK) province, formally part of Pakistan, but shares many
cultural affinities with GB. The region has a fragile mountain
ecology, with difficulties of access, extreme climatic
conditions, and marginalization. Due to its difficult
topography and poor infrastructure, access to the area is
problematic.
GBC has an estimated population of 1.6 million. The
population is growing at a rate of 2.47% and almost 60% of the population is below the
age of 30. Despite rapid growth of urban areas, the population remains largely rural,
with significant but undetermined seasonal and more permanent outmigration trends.
2.2 Economy
Roughly, 80% of the rural population is engaged in subsistence agriculture and meets
about 50% of the food needs in the area. Landholding is small, averaging only about
0.75 ha per family. The land-use is dominated by cultivation of food crops, fruit
growing, livestock rearing and agro-forestry. Only about 2% of the total land area is
cultivable and roughly 1% is already in use. Approximately 4% of the GBC area is
under natural forests and 52% under rangeland. Agro-forestry and horticulture (6%) are
other important uses of land. The rest of the land area is rock and under glaciers and
permafrost.
Agricultural diversification is slow, owing to small landholdings, limited capacity of
local markets and high costs and risks involved in accessing distant markets. However,
some headway has been made in developing certain value chains in agriculture, such as
potato seed, dried apricots, almonds and walnuts, apples, and cherries, based on the
natural comparative advantage of the area.
Table 1: GBC Population
District Population
GB 1,181,670
Gilgit 197,935
Hunza-Nagar 131,994
Ghizer 162,156
Astore 96,325
Diamer 180,581
Skardu 293,088
Ghanche 119,591
Chitral 431,273
TOTAL 1,612,943
Source: Extrapolated from 1998
census for 2010
11. 4
There is a small but growing service sector particularly in transportation, tourism, and
trade. Although the GBC’s mineral, hydropower and horticulture resources are
significant, this potential remains largely untapped.
Figure 2: Per Capita Income
Source: “GBER:Broadening the Transformation” Report no. 55998-PK (Washington, DC: World Bank, 2010).
Economically, the area has been developing at a slower pace due to physical constraints
of communication and shortages of energy and investment capital. Per capita income is
low at less than half the national average; poverty rate is high, particularly at higher,
single cropping valleys.
Roughly speaking, more than half of the household income comes from the non-farm
sector, including a growing portion from remittances. In aggregate terms, more than
34% of the population is believed to be living below the official poverty line of less than
US$ 2 a day, though there is considerable variation across the region.
Socially, there are significant disparities
across different parts of GBC as well as
within gender and social groups. The social
development indicators are relatively better
in valleys traditionally served by AKDN.
Literacy rate is high relative to other
comparable remote areas of Pakistan at about
76% among males and 61% among females;
tap water supply facilities cover only 45% of
the population (70% in urban and 30% in
rural), and basic electricity access is
available to about 60% of the population, but
with significant gaps in supply.
The social and economic status of women
remains a major issue in these traditional
societies. Women’s literacy in increasing, but they are largely excluded from higher
educational and employment opportunities in a large number of valleys, and they are
Page 6
Nominal Per Capita Income in GBC (Rs)
Source: GBER 2011, World Bank Staff Estimates based on PIHS and PSLM
data
•AKRSP is working on improving its methodology
to better capture incomes, expenditures etc.
GBs Per Capita Income in Perspec ve
-
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
2001 2005 2008
Nominal Per Capita Incomes (Rs.)
Programme Area Baltistan Gilgit
Astore Chitral Pakistan
Table 4.1: Nominal Per Capita Incomes (Rs.)
Programme Area Bal stan Gilgit Astore Chitral Pakistan
2001 14,068 13,796 16,801 11,053 11,090 24,198
2005 17,226 15,551 21,026 13,323 14,856 35,078
2008 15,571 14,762 18,334 12,841 13,299 35,889
Table 2: Literacy Levels in GBC (2008)
Districts Male Female Overall
National
Average*
69 44 56
GB 76 45 61
Skardu 71 34 53
Ghanche 74 35 55
Gilgit 83 61 72
Ghizer 75 47 62
Astore 71 47 59
Diamer** 44 15 30
Chitral 76 45 62
Sources: SESGBC 2008, AKRSP;
*Pakistan Economic Survey 2009-10;
**Hudur Valley Baseline Survey 2007
12. 5
almost entirely excluded from the formal economy and business sector. Unemployment
among literate women is emerging as new social problem.
GBC has a history of communal conflict,
experienced a long period of political
vacuum, but now slowly emerging from
its isolation.
Private sector is weak, but there is good
scope for major industries in key sectors,
particularly in hydropower, mining,
gemstones, horticulture, forestry, trade
and tourism, but this potential has not
been exploited to an optimum level. The
small and medium industries that exist in GBC are limited to small flourmills; saw
mills, furniture and wood workshops, hydropower stations, and hotels. These industries
are operating at a scale to meet only the consumption needs of the local population.
Table 4: Trade and Industry Sector in Gilgit-Baltistan
Private Sector Business
Assets
(In million of Rupees)
% of Total Assets in the
Private Sector
Transport 316.06 33.69%
General Trade 144.00 15.35%
Agriculture 123.20 13.13%
Infrastructure 101.30 10.80%
Tourism 75.20 8.02%
Banking 40.00 4.26%
Oil & Gas 34.62 3.69%
Mining 28.86 3.08%
Forests 22.00 2.34%
Industry 20.00 2.13%
Livestock 13.24 1.41%
Technology 12.80 1.36%
Power Generation 3.60 0.38%
Cottage Industry 2.12 0.23%
Const. Materials 1.20 0.13%
Total 938.20 100.00%
Source: NASSD Background paper, IUCN
Although, precise figures on unemployment are not available, it is estimated to be in
excess of 20%. High unemployment, particularly among the more vocal educated youth,
remains a major contributing factor to the poor law and order situation in the area.
Given the current high population growth rate, an estimated 600,000 people are
expected to join the work force over the next decade. Outside agriculture, public sector,
particularly the army, is the largest source of employment for people.
Assuming relatively static employment levels in the public sector and little expansion of
employment options in traditional agriculture, much of this growth in employment will
need to come from agribusinesses and non-farm enterprises. It is estimated that
Table 3: Selected Health Indicators
Indicator Pakistan GB
Growth Rate (%) 1.8 2.47
Infant Mortality Rate/
1,000 Live Births 73 79
Maternal Mortality Rate/100,000 90 450
Crude Birth Rate/1,000 Pop 25.0 36.4
Crude Death Rate/1,000 Pop 7.70 9.4
Source: Government Health Department Records
Source. Pakistan Economic Survey 2008-2009 (pg 170)
13. 6
employment opportunities in the private sector will need to treble over the next ten years
or out-migration will increase even further.
GB depends on the federal government for almost
all of its fiscal needs. Public funding for GB has
been increasing over the years, but development
needs are still greater. Chitral is the tail-end district
of KPK, itself a poor and conflict-ridden province.
Public sector funding for Chitral, based on its
population (5% of KPK’s population but 20% of its
land area) is inadequate. Until the construction of
the Lowari Tunnel project, which is nearing
completion, Chitral remained cut off from the rest of
the country for road communication for up to four
month of the year during winters. GB and Chitral
are connected by road, except during the winter months when Shandur pass is closed
due to heavy snow.
Chitral and Gilgit towns are connected to Peshawar and Islamabad by air, but air travel
is weather-dependent and unreliable. The Karakorum Highway (KKH) connects GB to
Islamabad and Western China. However, frequent landslides and recent terrorist attacks
on this single access road have made overland travel difficult and insecure. Public
sector’s capacity to deliver services to this remote area is not only hampered by fiscal
constraints, but also by poor policy and governance. Pakistan’s policy to keep GB in a
political limbo has given it zero leverage in foreign policy objectives and resulted in
poor economic policy and planning, and has hurt the country.
Being a remote area there are many constraints on private sector development, and they
include a continuing policy vacuum3
, and poor planning, such as lack of grid connection
with mainland Pakistan and within GBC. Difficult terrain and unreliable communication
systems, particularly snow-bound passes and frequent blockage of access roads due to
landslides; travel insecurity and uncertainty, and lack of energy act as other serious
bottlenecks on attracting investment capital to the area. The World Bank in its first
report on GB summed up the dilemma in the following words:
“… it bears recognizing that in many waysdevelopment in GB is against the odds,due its tough
geography and special administrative arrangements(including sharp fiscal constraints),as well
as the difficult wider Pakistan context (security problems and macroeconomic / fiscal
challenges). The region is geographically isolated, the population is small and dispersed, the
distances are felt more acutely due to the harsh terrain and variable weatherconditions, and the
longstanding divisions–both internal and external–impair the movement of people,goods and
ideas. Governance arrangements are complicated by the unresolved constitutional statusof GB,
the limited institutional capacity of the GB administration (GBA), and the complete fiscal
dependence on the GoP.While GB has enjoyed better security conditions than much of the rest
of Pakistan, the deteriorating situation in neighbouring provincesharms its development
prospects. A confluence of circumstanceshas also placed sharp strains on the rest of Pakistan,
including the coffers of the GoP, and GB’s allocation looks certain to be constrained in the near
future. What these shifting factorsmean on the ground is that development has been very
uneven,with many people in remote areas subsisting largely the same way ashave previous
generations”.
3
After the 18th
Amendment to Pakistan’s Constitution in 2010, many subjects have been devolved to the provinces,
including hydropower development for up to 100 MW, agriculture and education. However, small provinces such as
GB and KPK are not fully prepared to take advantage of thedelegated powers.
Table 5: Location of off-farm
workforce: 2005 (%)
Location of Work GBC
Within village 33
Out village but in tehsil 16
Out tehsil but in District 15
Out district but in GBC 10
Out GBC but in
Pakistan 24
Abroad 3
Source: AKRSP Case study, 2005
15. 8
1. OVERVIEW
Despite many constraints, there are opportunities for promoting broad-based growth in
GBC. The area holds good potential for developing natural resources, i.e., water for
irrigation and hydropower; mineral resources, particularly good quality dimensional
stone, gemstones; specialty foods, tourism and trade. The area is emerging from its
physical and political isolation and witnessing improved access to education, markets,
information and new technology. There can also be a demographic dividend from its
young and increasingly literate workforce, and improved gender relations and social
status of women. Proximity with China offers potentially huge benefits, not just in terms
of trade and commerce, but also for investment capital and technology transfer.
However, given the current fiscal constraints, public sector investment alone may not be
sufficient to develop these resources.
The growth strategy of the government is to expand and accelerate the role of the
private sector in developing GBCs strategic resources, and to engage with the civil
society organizations to ensure equity in access to social and economic opportunities.
There is good scope for a partnership approach among public, private and community
sector stakeholders.
The investment strategy must target relevant growth sectors, or strategic resources of
GBC, initially focusing on small and low risk opportunities, and incrementally building
clusters of productive activities. However, these opportunities can only be realized
through access to reliable energy and a well-trained workforce, not only in technical
occupations, but also in entrepreneurial, managerial and organizational skills.
Following are the strategic advantages of GBC:
Untapped natural resources, such as water for hydropower development and
irrigation, and mountain landscape and scenic areas for tourism
Comparative advantage of geography and climate for nature and cultural tourism
and growing high value temperate crops and marketing with a mountain specific
value (natural, organic, fair trade)
Relatively educated and young workforce, and increasingly high quality human
capital
Emerging opportunities for trade and commence with China and Central Asia
and uptrends in the flow of remittances to the area
Emergence of information technology sector for overcoming the physical
isolation and access
Political autonomy and self-governance for context-specific policy research,
planning and development.
2. RENEWABLE ENERGY
GBC offers tremendous potential to generate renewable energy primarily from hydro
and secondarily from solar sources. Its unique ecology, part of a larger mountain
landscape known as the Water Towers of the World, serves as a vital source of water to
the River Indus, on which the majority of Pakistan’s irrigation and hydroelectricity
depends. Enriched with permafrost outside the Polar systems, perennial flow of water
meets with significant slope gradient, giving the area unmatched advantage to generate
low-cost hydroelectricity. However, the answer may be smart, rather than mega
development.
16. 9
The hydropower potential of GBC is well established for large projects, such as the
Diamer-Basha Dam and Bunji and other projects in 100s or 1000s of MW capacity,
totalling an estimated 40,000 MW4. But these are complex and long-term projects,
requiring large sums of investment money and time to develop. However, there are
hundreds of other sites for building technically sound, economically viable and
ecologically smart projects.
A study conducted by WAPDA and GTZ (now GIZ) consultants on the potential of
hydroelectricity generation in GBC shows that from 24 sites that are accessible, a total
of 667 MW can be generated, while from a total of 122 potential sites surveyed so far
another 771 MW of electricity can be generated5
.
These mini and small sized projects are attractive from a host of strategic perspectives.
For one thing, they fall under the provincial authority, which makes them immune to
national and international politics, thus making them more feasible from a commercial
point of view. They also contribute to fiscal independence and better local governance.
In addition, there are many areas in GBC that receive a large amount of direct sunlight,
because of the relatively clean environment compared to the rest of country. Solar
radiation can be better utilized by undertaking solar power projects on a pilot scale,
especially in remote areas with small pockets of population, where extending
transmission lines are likely to be expensive.
2.1 Baseline situation
Although the region has seen many improvements over the last two decades, there is
still a serious shortage of electricity to meet the existing conservative demand. Table 6
shows existing and projected situation of demand and supply of the electricity in GBC.
Only Chitral town is connected with national grid, while GB is not. Within the GBC
area, urban pockets are connected with mini grids, while AKRSP and other NGOs have
built community-based MHPs in off-grid locations. Overall, about 60% the population
has access to hydroelectricity, but supply is erratic.
Table 6: Installed capacity and Demand (MW) GB and Chitral 2012
Provider
On-
grid
Mini-
grid
Isolated
off-grid
Diesel
generated
Total
Supply
Current
Demand
Demand
Gap
Chitral
WAPDA (National grid) 3 3
WAPDA (Local generation) 0.800 0.800
SHYDO 1.8 4.2 6
SRSP/Community 0.6 0.6
AKRSP/Community 8 8
Private sector 0.6 0.6
Total 4.8 14.2 19 31 12*
Gilgit-Baltistan
GB W&PDD 0 15 80 5 100 225 125
AKRSP/community 0 0 2 0.1 2.1
Total 15 82 5.1 102.1 225 122.8
* The current energy demand of district Chitral is 31 Mega Watt (MW) and available power is 19 MW, while intermediate demand
is 56 MW. The projected demand including heating and cooking for 2016 is 131 MW, therefore total projected demand is 187 MW.
4
www.adb.org/printpdf/projects/34339-043/main
5
http://www.ppib.gov.pk/HYDRO.pdf
17. 10
Presently, per capita power consumption in GBC is only 0.05 kW, which is the lowest in
Pakistan. With the existing plans of expansion of the capacity of power supply through
the public sector, it will not be possible to meet the projected additional demand and the
energy crisis will exacerbate more. According to the plans of GB Water and Power
Development Department (GB-W&PDD) a total capacity of around 160 MW will be
added to the current supply by the end of around 2016, which will take the overall
power generation to around 205 MW in GBs, which would mean that the electricity
produced will meet only the very basic needs and still there would be massive shortages.
Table 7: Tentative Cost ofPower Units
The public investment plans
in Chitral follow a similar
trend, thus that area too is
expected to continue to face
serious shortages.
Moreover, this capacity
does not allow for any
industrial activity to take
place in the area, which
means that no private investment for sustainable economic growth can be attracted to
the region.
2.2 Barriers on energy development
2.2.1 Policy and regulatory:
Policy vacuum and poor planning are major problems. Pakistan has consistently lacked
a realistic energy outlook, and slid into an unfavourable energy mix status, reducing its
share of low cost hydropower to 25% from 55% in the last ten years. Its energy policy is
highly politicized, resulting in failing to implement key shovel-ready projects, such as
Kala-Bagh Dam and many other mega projects upstream of Terbela Dam. Political
economy of Pakistan has opted for rental projects, lost opportunity to tap into vast
hydropower resources in the north, wasted its natural gas reserves for short-term gains,
and eventually led to 22 hour energy blackouts in rural areas, and decimation of industry
in the cities.
Alternative Energy Development Board (AEDB) is the principle national regulator for
promoting small-scale renewable energy technologies (RETs). In its new national
alternative energy strategy, AEDB has recommended special concessions for
community owned MHPs under 5 MW. However, it has failed to include RETs in the
IPP framework, and has managed to deliver just one project in the last ten years.
The policy vacuum continues. After the 18th Amendment to the Constitution, provinces
have the authority to develop their own energy policy, and can develop up to 100 MW
of hydropower projects through provincial guarantees. However, this delegation of
power has happened without much homework, and it has created many grey areas in the
development, distribution and pricing of hydroelectricity. The provinces are struggling
to develop their new policies, and small provinces such as KPK and GB, lack technical
and institutional capacity for good policy-making6
. In GB, the power to legislate over
key resources, such as hydropower, mineral and tourism are vested in the Gilgit-
Baltistan Council (GBC), the equivalent of an Upper House, headed by the Prime
6
The GB Government has recently signed an MOU with GIZ for technical assistance to develop a long-term
hydropower policy, brokered by AKRSP.
Site/ location Unit Size
Capital cost
(USD m)
Chinese
technology
Capital cost
(USD m)
European
technology
Chitral Town 0.5 MW 1 1.5
Garaum Chashma 01 MW 1.8 2.2
Ahmadabad II 0.5 MW 0.8 1.3
Shigar Ph III 01 MW 1.8 2.3
Misgar 2 MW 1.8 2.3
18. 11
Minster of Pakistan, rather than the Gilgit-Baltistan Legislative Assembly (GBLA), the
Lower House, which has created rifts within the provincial government.
Informally, communities and in the case of Chitral, at least one local investor, are
managing informal ‘IPPs’ through MHPs in off-grid areas, with technical assistance
from AKRSP and Sarhad Rural Support Program (SRSP). Local authorities in both
areas are supportive of these initiatives and have actively provided technical support and
distribution services (on government-owned mini-grids). But there is no policy or
precedence for a government authority purchasing power generated by a private
operator in both GB and Chitral. An electricity Board is now being formed in GB, and
tasked to develop an energy investment policy. In Chitral, a government-owned
company, called Sarhad Hydropower Development Organization (SHYDO) is engaged
in generation and distribution of hydroelectricity. Tariff rates are relatively low, though
rising, but poor collection and theft are common problems.
2.2.2 Technology:
Micro and mini hydropower technologies are well established. Nevertheless at the
community level, construction and maintenance of a power project is a complex
undertaking that requires technical and managerial skills that are not readily available at
local level.
AKRSP has experience with designing some 270 micro and mini hydropower projects
and in organizing communities to construct them. So far, only locally manufactured
technology has been used for such MHPs. The turbines used fall in the categories of (a)
Cross-flow, (b) Pelton wheel, (c) Francis, and (d) Kaplan types. Pelton turbines are used
for high head applications. Francis and cross-flow turbines cover medium head sites.
Kaplan turbines are used for exceptional low head sites in less steep locations. AKRSP
has previously employed only the former two in the region, as the latter two were not
previously manufactured in Pakistan. Future projects are likely to continue to utilize
Cross-flow and Pelton turbines because of their robustness and ease of local fabrication.
It is likely that imported technology will be used for plants of capacity above 500 kW.
In many cases, quality issues appear to have been overlooked in favour of low cost local
technology, leading to frequent breakdowns and low performance and extra
maintenance burden on poor communities. Civil construction also needs to be carried
out to high standards if the projects are to operate optimally over their full economic
life.
AKRSP has supported turbine manufacturers and service providers in both design and
construction supervision to ensure this. In Chitral a small company called Green
Alternative Power (GAP) has been supported by AKRSP, to provide technical services
to community-owned MHPs, and in GB, Mountain Infrastructure and Engineering
Services (MIES) is working.
AKRSP and GIZ have also supported Turbine manufacturers through overseas training
and licensing facilitation. Hydro-Link, a private company set-up by former AKRSP
employees has invested in a manufacturing facility near Islamabad, and supplying
turbines to a larger market in Pakistan and Afghanistan.
Any future program to scale up the MHP sector in Pakistan will need to focus on
upgrading technology and technical services. The lack of a domestic manufacturing
industry means that equipment must be imported, which drives the costs of renewable
energy projects up even further (Khattak, 2006).
19. 12
2.2.3 Market and financial:
Financial factors constitute a key barrier hampering the diffusion and promotion of
RETs in Pakistan in general and in GBC in particular. The capital cost of RETs is high
compared with conventional energy. Part of the problem is a general lack of awareness
of RETs benefits and high risk in investing in isolated areas. Off-grid RET-based energy
supply is typically not linked with income generation and finance, creating a problem
with sustainability of off-grid projects.
Previous experience by AKRSP and other support agencies shows that access to energy
alone does not improve production or productivity, but goes hand-in-hand with business
improvement and marketization of rural economies. Weak access of ‘value-added’
products to markets and high transportation costs involved in accessing distant markets
is a key barrier on investment. However, this situation may be changing with rising
costs and chronic shortages of energy in the mainland Pakistan. Many energy-intensive
industries in Pakistan may be persuaded by enabling policies in GBC to shift
investments nearer to low cost sources of energy and raw materials, such as iron ore,
marble and wood processing, which are found in GBC.
AKRSP has made some headway in devising an appropriate investment model for
developing RETs in GBC, leveraging public funding to raise community equity, and
accessing patience venture capital from Acumen Fund and carbon financing. Under this
arrangement, it is in the process of establishing four community-based power utilities in
GBC, ranging in capacity from 500 kW to 800 kW. The investment has come from
donors (50%), community equity (20%), and loan financing from Acumen Fund (30%),
which will be repaid using carbon revenue and tariff. One of these sites (Shoghore in
Chitral) has also secured a US$ 500,000 grant from Pak-Italian Debt Swap Fund, to
establish a stone craft industry, and plans to sell surplus electricity to nearby antimony
mine operated by a Chinese company.
This decentralized approach to energy generation through MHPs has already influenced
public sector and donor policy. The European Commission (EC) and German
Development Bank (KfW) have provided Euro 35 m and Euro 32 m worth of grants to
SRSP and PPAF, respectively, to scale up and extend this approach in the remote
valleys of KPK province, including off-grid villages of Swat and Dir. The Swiss agency
for Development Cooperation (SDC) is already supporting AKRSP in two large MHPs
in Chitral and is looking to scale up this approach in Federally Administrated Tribal
Areas (FATA) and in the larger Hindukush region, particularly in border villages
between Afghanistan and Pakistan.
The State Bank of Pakistan has announced a new policy to guarantee loans for up to
100% financing for hydel projects between 1MW and 10 MW built by the private
sector.
A UNDP/GEF funded project implemented by AEDB is focusing on PURE activities at
eight AKRSP built MHP sites in Chitral, but the results are not very encouraging so far7
.
2.2.4 Capacity & knowledge:
Weakness in linking energy supply, productive uses, and market management,
contribute to a continuation of the cycle of lack of structured support for PURE in GBC.
Weak links between RETs development and natural resources management (land, water,
mining) at community and local planning are key impediments. Absence of market and
7
http://undp.org.pk/productive-use-of-renewable-energy-pure.html
20. 13
technical services and lack of interdisciplinary expertise to work simultaneously on both
rural energy and productive uses and lack of expertise at community level in small
business management, are key issues.
2.2.5 Social-institutional:
The GBC region has a long tradition of cooperative management of common resources,
which has been further developed by AKRSP by mobilizing rural communities into
Village and Women’s Organizations (V/WOs), which have formed higher Local
Support Organizations (LSOs). These broad-based village institutions were supported
with small grants and technical assistance to undertake productive physical
infrastructure (PPI) projects, such as irrigation and feeder road networks, bridges and
flood protection devices, based on local needs and priorities.
In 1991, micro hydroelectric power units were included into the PPI portfolio8
. Today,
more than 4,000 V/WOs have completed nearly 6,000 PPI projects, including 270
MHPs, which they own and manage through locally devised cost and benefit sharing
mechanisms (AKRSP, Annual Review 2009). So, there is a good deal of social capital
in place in the GBC region that requires further support.
However, problems still persist, such as inadequate cost-benefit sharing arrangements
among community members, and a general aversion to private investors from outside
the area. Cultural gaps also exist between local communities and market-based service
providers. Local communities that own MHPs tend to keep their tariff rates much below
the market rates and go for low cost technology and maintenance options. Another
major problem is that these communities have become used to subsidies provided by
donors, even though they do have sizeable community savings, which can be invested in
up-scaling their existing plants and building new ones.
3. MINERAL RESOURCES
GBC has large deposits of rich minerals, including marble, granite, copper, iron ore,
gold and gemstones, among others. The area’s rugged topography and inaccessibility
make mineral exploration a labour and resource-intensive task. As a result, GBC’s
mineral reserves have not been systematically mapped or explored. Since mining
activities can cause environmental damage, only small-scale and artisanal mining must
be examined. Known deposits based on fragmentary surveys are shown in Table 8.
Pakistan is believed to have the fifth largest gemstone deposits in the world, and the
northern mountain areas account for 70% of Pakistan’s known gemstone deposits,
together with Azad Jammu and Kashmir (AJK), and KPK. GBC has reserves of
emeralds, ruby, topaz, tourmaline, aquamarine, sapphire, amethyst and spinal. It is,
however, not able to benefit from this resource as it lacks skills in lapidary (the art of
cutting, shaping and polishing stones), because of which, most of the exports are in the
form of uncut or raw gemstones. The value addition due to lapidary can be as much as
1:100 over the uncut form.
In addition to gemstones, the region also has rich soft stone resources, including marble,
granite, onyx and slate. Moreover, other industrial minerals, such as iron ore, copper,
antimony and gold deposits are also available.
8
In recognition of its work with rural communities in the area of renewable energy, AKRSP received the prestigious
Ashden Awards, also known as the ‘Green Oscars’. TheAward, which included USD 60,000, was bestowed upon
AKRSP by HRH Prince Charles in London in June 2004. In addition, AKRSP received the Japan Government
sponsored Global Development Network Award for Most InnovativeProject in 2005.
21. 14
Table 8: Mineral resources ofGBC
This situation offers a bright spot for GBC, providing it an untapped resource base that
could contribute to economic prosperity through export led business creation and
employment generation. The GB Economic Report prepared by the World Bank has
recommended gems and jewellery sector to be a potential source of income and
employment opportunity for the people of GB, through value addition and market
development for rapid economic development9
.
3.1 Baseline situation
The international trade in gemstones, excluding diamonds, is estimated at more than
US$18 billion per annum. Pakistan’s share in this trade is less than US$ 50 m. The
Gilgit-Baltistan Gemstone and Mineral Association (GBGMA) estimates that GB alone
accounts for around US$5 million of this total export from Pakistan, almost all in raw,
uncut form.10
Currently there are more than 18,000 people engaged in artisanal mining in the area.
Most of these people are unskilled persons practicing basic and primitive methods of
9
Gilgit-Baltistan Economic Report; Broadening and Transformation, 2010, WB, ADB and GoP
10
Presentation by NAGMA, Investment conference, 2011, Lahore.
Location
Mineral Deposits
CHITRAL*
Awiret Gol Fine grained lead-antimony sulphide ore, also containing gold, silver, tin and
vanadium (estimated at 290 tonnes)
Krinj, Partsan Antimony ore mined on a small scale (estimated at 8,617 tonnes)
Damel Nisar Good quality magnetite ore (estimated at 7.3 million tonnes)
Reshun Marble and dolomite, inter-bedded with limestone and shale
Gahiret, Kalash
valleys, Shoghore
Large quantities of fine quality marble
Gahiret, Koghuzi Large quantities of granite
Lonkuh, Mirghash Arsenic minerals such as orpiment and realgar occur in large deposits some
4,000 m above sea level in Terich valley
Kaldam Gol
(Drosh)
Galena, pyrite and copper minerals such as chalcopyrite reported
Pakhtori (Oveer) Quartz veins containing lead-zinc ore and copper
Melp Gol (Rayeen) Antimony
Kushum Antimony in large quantity
Koghuzi, Reshun,
Shoghore
Granite, marble and dolomite
Golain Soapstone
Shishikuh,
Munoorgol(Garum
Chashma)
Talc, gemstones such as aquamarine and topaz
Madashil Dolomite, galena and pyrite
GILGIT-BALTISTAN**
Hunza, Nagar and
Haramosh
White marble, ruby, aquamarine, sapphire, quartz, topaz, emerald, pollucite,
rutile quartz, morganite, apatite, spinel, and pargasite
Shigar Aquamarine, sapphire,topaz, apatite, zoisite, rutile quartz, epidote, emerald-
coloured tourmaline and morganite
Ghizer Onnix and marble
Chilas Alluvial diopside, zircon, rutile quartz, aquamarine, and tourmaline
Source: *Geological Surveyof Pakistan, 2000; Aslam and Khan, 2002
** http://en.wikipedia.org/wiki/Gemstones_of_Pakistan#Gilgit_Baltistan
22. 15
prospecting and mining. Most of the miners are local villagers who assemble in small
groups to go to the mountains, mostly above 10,000 feet to explore products in the area
for 2 to three months. Due to lake of basic prospecting and mining skills these miners at
the end of their season, return with damaged products and some even return empty
handed.
At processing level small scale training in cutting and polishing has been recently
started by AKRSP with the support of private sector. Government has established a
gems cutting and polishing training centre in GB recently. Rupani Foundation (RF) and
Karakoram Area Development Organization (KADO) are other key players in this
sector. However, these initiatives cater for only basic training in gems cutting and
polishing and cover a limited number of people. Jewellery making is almost absent in
the area, with no institution to host and foster, the few family based basic traditional
jewellery makers who have either switched to other professions or lost markets now
captured by synthetic and modern jewellery supplies in the market.
3.2 Non-energy barriers
3.2.1 Policy and research:
As noted earlier, GB has no policy in place for mineral development, and the
government is not issuing any prospecting or exploration licenses for industrial minerals
until a policy is formulated. There is very little geological knowledge available on GBC
and detailed district-wise information for exploration of minerals does not exist. The
United States Geological Survey (USGS) carried out a reconnaissance geological survey
of upper Chitral in 1975, followed by a detailed survey in 198111
. Since then, not much
has happened, hence the exact data on industrial minerals and gems deposits are not
known and most of the information are based on estimates. Pakistan’s Year Book on
national energy and minerals statistics GB is not even mentioned12
. Basic research and
physical surveys in GB are hampered by the unsettled political status and military
restrictions on research in border areas.
In Chitral, where relatively more information exists, mining activities are increasing,
and many national and Chinese companies are engaged in industrial mining activities.
3.2.2 Skills and technology:
In Pakistan in general and in GBC in particular there is a dearth of skilled people at all
level of the gems and jewellery sector. There is no institution to provide certified
training in artisanal mining and lapidary in these mountain areas, well known for
gemstones. Local groups are engaged in small-scale informal artisanal mining of
gemstones and marble. The mining practices are primitive, involving crude blasting of
rocks for mining precious and semi-precious stones. Foxholes are dug across the sheer
faces of the mountains, which in most cases yield very small material, and cause death
and injury to miners.
Because of non-availability of scientific mining practices and skills most of the raw
gems are damaged as well as the mining areas, thus reducing the value of the raw
product at source. The quality of marble is excellent and can be seen at the Marriot
Hotel, Lahore. However, unscientific quarrying methods used results in much wastage,
and damage to the quarry.
11
http://137.227.231.179/publication/ofr75556 and http://pubs.usgs.gov/pp/0716g/report.pdf
12
www.pbs.gov.pk/sites/default/files/other/yearbook2011/ENERGY%20%20&%20MINING/7-3.pdf
23. 16
3.2.3 Infrastructure:
The difficult geography is a major constraint. Most mining areas are located in isolated
and dissolute areas with little or no infrastructure. High transportation costs, especially
for dimension stone/ marble is a problem.
3.2.4 Value addition and marketing:
There is little or no value added at the primary level. Until 2005, stone cutting
technology and skills did not even exist in GBC, which is surprising because this is a
major source of semi-precious stones. As a result, the bulk of stones were and are still
traded in raw form, primarily because the cutting technology and skills are still at an
early stage of development. Getting the primary production processes right, including at
the mine level and cutting and polishing stages is critical to producing a high value end
product for discriminating markets.
Markets are not transparent. Local traders do not have valuation skills and adequate
information on market opportunities. They are entirely at the mercy of savvy traders
from down country, who buy raw gems at throw away prices and then export to China,
Dubai and European markets for much higher prices. Even in the urban centres of
Pakistan, jewellery makers are slow to adapt to changing market trends and unable to
capture higher value for their products.
3.2.5 Locational issues:
As minerals are mostly located in communal lands, it becomes almost impossible for a
Lessee to start mining without the permission of local tribes or clans that own these
lands. Disputes also exist over the ownership of communal lands, both among
neighbouring tribes and with the government, when a Lease is issued without the
knowledge of the local community.
4. HIGH VALUE AGRICULTURE
4.1 Overview and baseline
The natural environment of GBC (isolation, elevation, high solar radiation during day
time and cool nights, and fresh water for irrigation) and seasonal difference with the rest
of the country provides it with a distinct comparative advantage for producing a number
of high value crops. However, to get to a level of sophistication where specialty
products can be competitively produced and traded, requires good planning, investment,
technology transfer and market and brand development. This is where policy autonomy
and strategic orientation and context-specific research and investment friendly decisions
by local government will be necessary to unlock the inherent potential of this area13
.
Following are some of the areas in which GBC can develop its comparative advantage
and specialization in the long-term.
4.2 Production, processing and marketing of nuts:
The villages in GBC are ideal for producing high quality nuts, such as almonds,
walnuts, apricot kernels, and some specialty products, such as chalghoza. Much of the
produce is currently sold unprocessed, to local shopkeepers, who in turn, sell them to
down-country dealers, without adding much value at the local level. This important sub-
sector can be organized and streamlined with a view to adding value at the village level
13
Much of agricultural research conducted in mainland Pakistan is focused on export commodities, such as rice,
cotton, sugar cane and wheat, not relevant to the mountain environment of GBC.
24. 17
with very little investment and can become an important business activity, especially for
local women during the slake winter period. Another advantage of this sub-sector is that
nuts are usually produced at higher elevation, single cropping villages, where poverty
levels are high. Nuts have a long shelf life and can be easily stored and transported, so
there is no particular risk in postharvest handling.
A breakthrough in developing this value chain has already been made. With technical
support from AKRSP, a local company, called Mountain Fruit Pvt., has established a
processing unit in Ghizer Valley, near Gilgit Town, and secured a large order from Ben
& Jerry, the well-known Ice cream company in the United States, for supplying almonds
and walnuts under fair trade label. The company buys small quantities from the
surrounding villages and processes the product at a newly built processing facility, and
employs some 80 workers, mostly women, on part-time basis. This is an important value
chain in the making, requiring technical support from research and extension agencies,
mostly in the supply of certified plant material and propagation of commercial varieties
through nurseries at different elevations.
4.3 Production of high-quality seeds:
The GBC climate and its isolated valleys are ideally suited for producing high quality
and disease free potato, vegetable and flower seeds. The seed technology is already
tested in GBC and commercial vegetable seed produced in the area has already been
introduced in the country
on a limited scale.
The market demand in
the country is high, as
much of the vegetable
seeds are imported from
Holland, India and
China.
The need is to simply
scale up this proven
activity through further
in-situ research,
certification and business development services.
Table 9: Seed Potato produced through Tissue Culture lab, in GB
Year In vitro
plants #
Sprout
cuttings #
Stem
cuttings #
Micro
tubers #
Pre basic
seed(t)
2000 15,000 8,000 25,000 100,000 13.700
2001 17,600 24,000 28,600 103,000 36.400
2002 20,200 37,000 46,600 110,000 28.800
2003 21,700 --- 87,300 207,000 36.500
2004 22,000 9,600 95,000 250,000 55.000
2005 16,000 4,400 32,000 60,000 --
2006 10,000 1000 2000 45,932 2.300
2007 12065 1000 1203 155,000 15.000
Source: GB Government Presentation, 2011
Case study 1: Mountain Fruit (Pvt.) Limited
Apricot is a widely grown fruit in GBC and it is also one of thewell-developed value chains, although only 2%
of the totalproduction is properly marketed after drying, so far, so it still holds tremendous potential. In the
1980s, when Karakoram Highway was just built, very small quantities of apricot were sold in thelocal
markets, with an average selling price of PKR 6 per kg for dried apricots. Today the selling price of good
quality dried apricots is PKR 180/ kg. Under a focused approach, AKRSP consolidated its technical and
marketing activities in this sub sector, under a separatecost center in year 2000, called Dried Fruit Project
(DFP). By 2003, an autonomous business entity was created, called Mountain Fruit (Pvt.) Limited (MFL), with
formal business and financial management procedures, including full compliance with SEC regulations. These
changes led to tangible improvements, including better management practices, a diversified product portfolio
(walnuts, dried apples and tomatoes) improved margins and profitability, and new innovations, such as passing
the certification test prescribed by the Fair Labeling Organization (FLO), and qualification for the associated
premiums for the product. By theend of 2005, the enterprisehad a net value of PKR 9.155 million, including
distributable profits of PKR 2.655 million to AKRSP. In 2006, MFLwas sold to the management of the
company, who paid about PKR 10 million for the enterprise. MFLis now a growing business and it exports
walnut, almonds and dried apricots to UK and USA under fair-trade label.
25. 18
4.4 Production and marketing of fresh fruit and vegetables:
Seed potatoes, Apple, cherry and green peas are lead products that are already being
produced and marketed with reasonable returns to farmers. This has happened only in
the last ten years though. The main advantage is seasonal difference with the rest of the
country, as the harvesting of most vegetable crops takes place in winters in the plains of
Punjab and Sind, while the growing season for these crops is summer in GBC.
The fresh fruit and vegetable value chains are dominated by the savvy traders from KPK
province, who control everything from crop purchasing before harvest, to post harvest
handling, transportation and distribution in major urban markets in Pakistan. Local
entrepreneurs are beginning to learn the tricks of the trade.
There is room for further improvement in the supply chain, including delivery of real-
time market information to producers using mobile phone platforms, varietal
development, especially supply and monitoring of certified plant material, post-harvest
handling and local packaging and branding. Recently, a private initiative has established
a cold chain system near Gilgit town and exported fresh cherries to Dubai for the first
time.
4.5 Livestock products:
With average landholding less than one ha, pastoralism is a key part of livelihoods for
the majority of farmers. Rangelands account for 54% of the total area. Much of this
rangeland consists of summer pastures of varying quality, and a significant number of
animals must be culled at the on-set of winters because of severe winter feed shortages.
Thus, when the animals are brought down from high pastures towards the end of
October, there is an oversupply in the local market and prices are depressed. The major
problem is over supply of livestock during this short, 4-6 week period in early winters
and under supply of local meat during the rest of the year. Resource poor pastoralists
have very little bargaining power in towns where authorities and buyers mistreat them.
This has trapped them in a vicious cycle of poverty, in spite of year-round hard labour
and drudgery of pastoral families, including children. There is little or no value-added in
the local meat sector. Butchers sell fresh meat as a mix bag of bones, intestines, organs
and boneless meat (a piece of fat is thrown in for good measure) with little product
differentiation. In almost all municipalities in Pakistan, the price of fresh meat is
government controlled, but this rule does not apply to frozen meat.
It translates into under-developed markets for live animals and meat, with primary
producers, the pastoralists, benefiting the least. Through training, technology transfer,
and supply management methods, local meat can be made available to urban consumers
throughout the year. Key activities that can help develop the sector may include
establishing private or community-based cold storage facilities at high altitude valleys,
establishment of auction or weighing systems and promoting value chains for high
quality meat.
A related intervention can be feed improvement, especially during winters, using
formulations that use locally available ingredients. The wool value chain is another
significant development in the higher valleys of Chitral, with a focus on making markets
work for poor women. See case study 3.
4.6 Production and marketing of honey:
Honey production is a fairly new activity in GBC. The quality of locally produced
honey is very good because of the special flora found at high altitudes and the pristine
26. 19
environment. However, there are specific constraints in processing and packaging,
branding and marketing. Branding and certification seem to be missing elements, as
despite good demand for local honey, there is no way to differentiate local honey from
other types of honey available in the market.
Table 10: Total Value ofFruits Produce in GB (000 PKRs)
AKRSP and the International
Centre for Integrated
Mountain Development
(ICIMOD), and Hashoo
Foundation (whose
Chairperson owns five star
hotel chains in Pakistan)
have collaborated in
developing the honey value
chain, and this initiative was
the winner of BBC’s Global
Challenge Award in 2010.
4.7 Farm forestry:
Agro-forestry is a well-
established farming practice
in GBC. Forest trees are grown on irrigated lands for a variety of purposes, such as for
fuel-wood, fodder, timber for construction, wind breaking, soil stabilizations and more
importantly, as store of natural capital, to be enchased when required. In the first two
decades of AKRSP, communities asked for irrigation projects to bring new land under
cultivation. As most of the land, which came under irrigation, was hilly and marginal, it
was ideally suited for agro-forestry. AKRSP’s social forestry program, aimed at creating
a buffer between human settlements and natural forest, was a huge success and it led to
the plantation of an estimated 50 million trees over two decades. Today, GBC’s agro-
forests cover roughly 6.3% of the land area, compared to just 3% of the natural forest.
With investment in energy, processing technologies and good marketing, the agro-
forestry wealth of GBC potentially offers a huge opportunity for producing green and
certified wood products, worth millions of dollars, and can also reduce the pressure on
natural forest.
Table 11: Average Household Forest Tree Holding in 2008 - By Species
Tree Species
Program Skardu Ghanche Gilgit Ghizer Astore
Poplar 79 121 83 90 59 7
Willow 67 68 92 60 80 4
Russian Olive 16 28 14 21 9 0
Rubinia 12 5 1 40 8 1
Ailanthus 5 0 0 19 5 1
Mulberry 5 14 2 6 3 1
Chilly 0 0 0 1 0 1
Others 6 0 0 27 0 2
Total 191 236 192 265 164 17
Source: An assessment of Socio-Economic trends (2005-2008) by AKRSP
4.8 Trout fish:
The GBC area has extensive fresh water resources, with a good opportunity for the
development of inland fisheries and aquaculture. There are 9 rivers and more than 250
Fruit
Production (t) Average Sale Price
PKRs@ Farm gate
Value
PKR
Apricot 108588 5.34 579,860
Apple 19054 21.20 403,945
Grapes 6413 30.21 193,737
Pears 2579 24.45 63,057
Peaches 3308 14.58 48,231
Pomegranate 4287 59.52 255,162
Cherry 2256 94.30 212,741
Walnut 5992 90.00 539,280
Almond 1700 120.00 204,000
Source: Agriculture statistics2007 and RMA
2,500,012
27. 20
streams that drain water in the great Indus and Kabul rivers, besides numerous fresh
water lakes over an area of 570 hectares. Private sector is not effectively involved in
trout farming. The availability of technical support and seeds from some 18 Trout
Hatcheries and breeding farms under public sector are currently not disseminating
knowledge and services in an effective way.
4.9 Other niche products:
Sea-buck throne (hippophae rhamnoides), is a widely available resource in GBC, which
is emerging as a high value product in the area. A local entrepreneur from Skardu, with
technical and funding support from ICIMOD and local NGOs, has been able to turn this
resource into a viable business. He buys small quantities of sea-buck throne seeds from
poorest families and processing and exporting oil and dried berries to Europe and North
America, as well as making consumer products, such as juices and jams for local
market. Still, much work needs to be done in terms of selection and propagation of more
productive varieties, harvesting and processing techniques and branding for scaling this
sub-sector for the benefit of local people. Buckwheat is another specialty crop in GBC
with potential commercial value.
4.10 Market Access
GBC is emerging from its isolation and slowly integrating with markets and sources of
knowledge and technology. However, to get to a competitive position, it has to focus on
long-term specialization and private sector-led growth.
Case Study 2: North-South Seed (NSS)
Between 1997 and 2000, AKRSP implemented a project to promotecommercial production of vegetable seed,
mainly, turnip and onions. The results were good as thenatural environment for seed production provided ideal
conditions, such as isolated valleys, high solar radiation, cool nights, high altitude, and good quality water for
irrigation. In 2001, theproject was converted into a formal seed company, owned by AKRSP, called North-
South Seed or NSS. By 2003, NSS had developed as a well-known brand, and had captured 5% of the market
share in thetwo seed segments: onions and turnips. AKRSP, faced with funding issues decided to break this
project into parts and handed them over to project staff, as two privatecompanies, one in Gilgit and one in
Chitral. The main issue in this business was expensive sales outlets previously maintained by AKRSP in major
towns of Pakistan; thesewere closed down and the new companies were encouraged to focus only on producing
high quality vegetable seed, while relying on major wholesalers in Pakistan for marketing. These two
companies were turning a small profit as of 2005, while benefiting 210 specialized seed-producing farmers.
Both these companies are currently struggling because of working capital and looking for strategic investors.
The scopefor growth is high, which can be realized by further investment in this sector.
Case 3: Mough Public Limited
In the 1990s, AKRSP intervened in the wool sub sector in Chitral, with funding support fromthe Ministry of
Women’s Development and Swiss Agency for Development and Cooperation (SDC). Theproject focused on
improving the quality of wool and wool fabric, called pattu under the brand name Shubinak. After the funding
for this project ended in 2006, a public limited company was formed, with majority shares initially retained by
AKRSP, but with the intention to transfers all the shares to women associated with the wool value chain. This
enterprisepurchases woolen fabric from the producers and designs and produces value-added garments for the
high-end market in Pakistan and for export. The business model is based on theneed to streamline and improve
the value chain by achieving economies of scale in the production and supply of traditionalChitrali woolen
fabric, which supports, morethan 5,000 people, mostly women, in various activities associated with this sector.
About 20% of the shares of this company have so far been distributed to women producers, suppliers and staff,
and the remaining shares are to be transferred in the next two years. Mough limited has expanded its product
line and now also supplies embroidery products to two companies, Poly and I, an Australian company, and
Charisma, a Pakistani handicrafts company. Mough has two sales outlets, one in Chitral Town, and another in
Lahore, and it is a profitable company.
28. 21
Demand is growing for farm products and general services in emerging urban centres. A
number of products produced in the area are also reaching national and even export
markets. China, which is next door, and potentially a great opportunity, is still
unexplored.
Local markets:
Demand for local horticultural products is comparatively low, primarily because the
larger population has access to home grown supplies. However, consumer behaviour is
changing and specialization trends are observed. Among fresh fruits, apples are in
demand in local markets, followed by grapes and apricots. Globalization effects are also
being felt in local markets as dumping of low cost Chinese grapes are outcompeting
local grapes in these weak markets. Interestingly, fresh fruit market in GBC works like a
futures’ market.
Produce is open for sale at pre-harvest stage, at a lump sum price, usually favourable to
the buyer, who takes care of the harvest and controls the entire value chain. However,
Market dynamics are changing. Local youngsters, who work for these savvy
entrepreneurs from the south, are educated and able to learn market dynamics. Some
small local marketing groups are actually investing and acting as suppliers to down
country traders.
Table 12 explains volumes of locally produced fruits reaching local and national level
markets.
Table 12: Wholesale Supply ofDry Fruit (PKR million)
Fruits GB Gilgit
Hunza/
Nagar
Ghizer Astore Diamer Skardu Ghanche
Almond Kagazi 304.47 142.94 17.28 26.59 59.60 8.93 40.64 8.50
Almond Katha 132.48 57.86 18.56 28.89 3.28 6.13 13.47 4.29
Apricot-A 136.45 50.97 12.29 25.33 2.30 6.88 24.12 14.56
Apricot-B 78.78 14.75 7.92 26.60 9.94 4.51 9.12 5.93
Apricot-Normal 25.59 5.90 0.25 9.11 1.13 0.00 6.02 3.19
Kernel Bitter 19.43 8.51 1.97 2.67 0.00 0.00 3.62 2.65
Kernel Sweet 37.93 8.53 3.61 9.37 0.00 6.98 5.89 3.56
Mulberry A 49.48 16.56 19.04 8.44 0.00 1.33 3.97 0.14
Mulberry B 14.32 2.62 10.22 1.49 0.00 0.00 0.00 0.00
Walnut 106.39 37.84 11.10 19.85 1.94 5.81 23.34 6.50
Total 905.32 346.48 102.24 158.33 78.19 40.56 130.20 49.32
Source: AKRSP RMA 2010
National markets:
Accessing national markets pose many risks for local traders. However, GBC has
benefitted from exposure to larger market systems and ‘down-country’ entrepreneurs
have helped to integrate this area with national markets, especially for off-season and
specialty products. Figure 3 shows the value of fresh fruit marketed in down country in
2009. Seed potatoes, cherries and apples are lead products that are being marketed in
major urban markets of Pakistan. Many problems still remain but access to larger
markets is good news for GBC.
29. 22
Figure 3: Vegetable supplies to local markets
Source: Basari Check post DOA, GB 2009, quoted in AKRSP-JICA Report
Figure 4: Export of fresh fruit to national market
Source: Basari Check post DOA, GB 2009, quoted in AKRSP-JICA Report.
In terms volume, potato (both seed and table-potatoes) is the single largest vegetable
produce from GB, which has a consistent demand in the national markets. Figure 5
shows the export of seed and table potatoes to the national markets in 2007, which was
around 85,000 ton. There is a latent demand for 400,000 ton of potato seeds in the
national markets and GB has the potential to cater for this demand (AKRSP/JICA, Basic
Horticulture Study, 2010). However, after a landslide that blocked the Hunza River and
cut off a key potato producing area in 2010, potato trade has been reduced dramatically.
Apart from potato, green peas and bell pepper have also made their way into the
national markets, due to their off-season advantage. According to rough estimates, more
than 300 tonnes of green peas from Chitral are sold annually in the national markets.
There is huge demand for off-season vegetables in the national markets, and the current
supply is not enough to even cater Rawalpindi/ Islamabad markets for a few weeks,
according to a trader.
After the opening of the Lowari tunnel, marketing of off-season fruits and vegetables is
picking up in Chitral, especially green peas, wool products, and apples. Lack of
packaging and non-availability of wholesale markets are the most important issues of
marketing of horticultural crops in GBC, followed by low volume of production to
compete in the national market.
0
3
6
9
12
15
18
Beans
Cabbage
Capsicum
Garlik
Cauliflow…
Chinese…
Cucumber
Okra
Onion
Peas
Potato
Radish
Tomato
Turnip
ValueinPercent
Products
Supply of FreshVegetable from LocalProducers throughRetailers
0
500
1,000
1,500
2,000
Cherry Apple
421
1,895
QuantityMetricTonnes
Export of Fresh Fruit to National Market
30. 23
Figure 5: Annual Export of Potato from GB to Down Country
Source: DepartmentalCheck posts at Basari, DOA, quoted in AKRSP-JICA Report, 2009
Figure 6: Down Country Exports from GB
Source: DepartmentalCheck posts at Basari, DOA, quoted in AKRSP-JICA Report, 2009.
International Markets:
As the northern tip of the North-South Trade Corridor (NSTC), linking China and
Central Asia with South Asia, GBC can also be a hub for trade, transit and travel (border
economy). GBC’s major advantage is its proximity to China. China is the nearest
international market for the produces of GBC. However, the horticulture products of this
area have not made inroads into this market due to several reasons primarily
certification and quality issues and stiff completion.
Presently, the volume of trade through the Khunjerab pass is very limited, and it is
almost one-sided. During 2007-08, only 4% (Rs 3.1 billion) of Chinese imports to
Pakistan came through the GB corridor. In terms of Pakistan’s exports to China,
shipments through GB constituted only 1.5 % of all exports, while 83% of exported
goods left from Karachi, according to the World Bank. However, China is assisting
Pakistan to upgrade KKH and has created a free-trade zone across the border, and is
likely to encourage border trade.
Despite trade agreements, agricultural produce, the goods from GB most likely to find
markets in China face tariff and non-tariff barrier, such as the prohibitive quarantine
requirements on fresh agricultural products. On the fiscal side, the authorities need to
mobilize more revenue from trade and reinvest it to improve local facilities. Finally, the
73314
68510
76541 78621
71562
68562
75452
76191
84904
60,000
65,000
70,000
75,000
80,000
85,000
90,000
1999 2000 2001 2002 2003 2004 2005 2006 2007
YEAR
Quantity Exported Potatoes (Ton)
76992
350 317 3141
0
20,000
40,000
60,000
80,000
100,000
Table Potato Seed Potato Bell Pepper Peas
Down Country Exports from GB
Quantity (Tonnes)
32. 25
Poor access to inputs and technology:
The main issues are non-availability of improved seed, fertilizers and pesticides and
farm machinery due to absence of mainstream national and multinational seed and
fertilizer trading companies. Major advances in agriculture around the globe have been
made through technological advances in agriculture. GB with its limited land resources
is in need of such technologies.
However, the area is critically lacking even the simplest production technologies, which
have been successfully adopted elsewhere in the world. Key issues include lack of area-
specific R&D to produce suitable hybrid and synthetic varieties, capacity issues,
absence of quality seed testing and diseases diagnostic facilities with trained
technicians; poor technical information base and lack of linkages with the national and
international knowledge sources.
Poor crop management:
Poor access to quality inputs and improved technology has limited farmers’ capacity for
standard crop management practices, which are critical to obtaining a good harvest,
resulting in low productivity and significant losses in post-harvest handling. Limited
market access and non-availability of commercial varieties, has also hampered
specialization in agriculture and horticultural.
Poor Infrastructure:
Major agricultural infrastructure in GBC includes water channels, farm to market roads
and the storage facilities. But most of this infrastructure constructed by the communities
without the use of modern engineering techniques, are prone to natural disasters, such as
flooding, landslides, earthquakes, creating serious maintenance issues. The generation
of farmers who maintained these community infrastructure services are aging, while the
younger generation is slowly turning away from traditional agriculture. In addition, key
infrastructure services area missing, such as cold/storage facilities.
Knowledge gap:
The farmers in GBC lack the knowledge regarding the possibilities of processing
various fruits and vegetables produced in the region.
Small volumes and low quality:
At the current scale, fruit and vegetable processing is a household activity and it is likely
to remain at household level unless the private sector steps in and modern production,
processing, and marketing strategies adopted. The fruit and vegetable processing
techniques are not standardized and hence critical volumes of a single product,
necessary for trade are not available.
Absence of quarantine standards
A major barrier on export of horticultural products to China through Khunjerab border
is absence of quarantine and certification services.
5. TOURISM
5.1 Overview and baseline:
Tourism is yet another distinct advantage of GBC, and can be a key driver for growth if
managed sustainable, especially in the long-term. The unique mountain landscape and
cultural diversity of GBC makes it an attractive destination, especially for international
adventure tourism. Tourism started in GBC in the 1970s with better air and road access,
33. 26
particularly after the construction of KKH. It became a thriving sector during 1990s, but
it has now almost completely collapsed due to worsening law and order situation and
negative image of the country outside. The reversal started when Pakistan exploded a
nuclear device in 1998, responding to a similar act earlier by India. Then came the
attack on USA in 9/11, Afghan war, and the rise of militancy and cycles of violence in
Pakistan. Tables show peak years in tourism in GBC and the continuing decline.
GBC still attracts mountaineers and nature lovers and small numbers of climbing and
trekking expeditions come to the area, never minding the difficulties of securing a visa
and travelling on broken and increasingly unsafe Karakorum Highway. They hire
hundreds of porters, cooks and sardars on their expeditions, and indirectly contribute to
transportation, hospitality and other jobs.
Despite poor promotion of GBCs for domestic
and international tourism, a number of national
and international agencies, including IUCN,
UNDP-GEF, AKRSP and K2-CNRhave
worked with local government agencies and
communities and promoted integrative
initiatives in tourism, conservation and
sustainable development. These include
community involvement in the management of
Khunjerab Park by Khunjerab Village
Organization (KVO), a PPP program for trophy
hunting in which the government, community
and private outfitting companies are partners, and community-based conservation
regimes, operating in different parts of GBC, and the annual Polo festival at Shandur.
5.2 Main barriers
Other than security concerns, access to GBC by air and road are the biggest barriers on
tourism industry. Upgrading Skardu airport, the gateway to K-2 and other high peaks in
the Baltoro area, as an international airport and allowing chartered flights from the main
tourism originating countries may be a quick solution. Another possibility is to develop
GBC a tourism destination from the Chinese side may be another good area. This will
be a specially useful idea, as thousands of tourists come to the Khunjerab border from
the mainland and Hong Kong, and upper Hunza, which has been cut off from the rest of
Hunza by the newly form Atta Abad lake can be an ideal tourism destination around the
lake, turning a disaster into an opportunity.
In 2008, InWent, the German international capacity building agency (now part of GIZ),
AKRSP and Xinjiang Academy of Agricultural Sciences (XAAS) with support from the
provincial administrations and in collaboration with the local tourism departments in
GB and Xinjiang China organized a regional workshop on integrated tourism concepts
to contribute to sustainable development in mountain regions in Gilgit and Kashgar. The
workshop came up with the following recommendations.
Notwithstanding the occasional shocks, tourism sector is relatively under-developed in
GBC. Therefore, a well thought-out enabling policy in this sector is needed to realise
this significant potential in the long-term, providing opportunities to diversify the
income streams available to local communities as well as to serve as an effective
instrument for a wider economic development strategy for the region. Tourists and the
Figure 8: Foreign tourist inflow in GB - 2008
0
200
400
600
800
1000
1200
1400
1600
1800
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Persons
Monthly arrival of tourists
Foreign tourist inflow inGilgit-Baltistan2008
Source: Tourism Department, Gilgit
34. 27
tourism industry represent an additional source of livelihoods for poor, isolated and
marginalised communities.
Table 13: Recommendations and Action Points
S# Recommendations Actor/ Action
1 Establish (pilot) free economic zones to promotecross-border
tourism industry between Kashgar and Gilgit/Skardu.
Government of China/Xinjiang
Prefecture and Government of
Pakistan/Northern Areas
Administration
2 Establish joint working groups to promotesmooth facilitation of
tourists (ensure security and improved police cooperation),
collaboration between tour operators/privatesector and enhance
peopleto peoplecontacts and cultural exchanges
Governments
Private sector
International organizations
Cultural organizations
3 Promote academic and research collaboration between Xinjiang
University Urumqi and the Karakoram International University
Gilgit for tourism, environment, culture and development related
topics
Xinjiang University
Karakoram University
4 Strictly enforce/implement environmental laws and conduct
EIA/SEA for tourism and infrastructure related projects in
fragile mountain ecosystems in theborder regions;
Road and Highway Authorities
National Parks and Nature Reserves
5 Undertake and promotepersonnel exchange and training and
share best practices and learning across the border concerning
natural and cultural heritage;
Natural Reserves
Park authorities
Tourism
Conservation agencies/Projects
Department
Civil Society
6. Develop unique products (branding ecology, unique mountain
cultures and old silk route) to promoteboth Xinjiang and
Northern areas (Hunza-Nagar, Gilgit, Baltistan);
Tourism Departments
Tour Operators
7. Jointly organize campaigns, like ‘month of wildlife/biodiversity
protection’ each year in themonth of may involving schools to
create environmental awareness;
Wildlife and Parks departments
International conservation agencies
Education and Tourism Departments
Local communities
Source: Workshop Report, 2008.
36. 29
1. INTRODUCTION
Based on the analysis of resource development potential and assessment of market and
coordination failures in the preceding parts of this report, the following sections outline
an initial investment plan for removing energy and investment barriers on locally
identified growth sectors at five pilot locations in GBC. It is intended to identify
investment opportunities and business development strategies, taking local factors and
emerging market opportunities into account.
The investment plan provides estimates on likely costs and returns on various
investment clusters, designed to capture best value-added from a range of geo-
economic, human and social capital, and natural and advantages of GBC in the long
term. However, the assumptions made are best estimates based on available data,
experience and ideas collected from experts and local stakeholders.
Detailed feasibility studies may be necessary to make final investment decisions by
prospective investors.
2. GOAL AND STRATEGY
The development goal is to promote private sector led, but inclusive growth and
customizing and indigenizing smart development options to GBC context. The unique
ecology, resource potential, community organization, a young and literate work force
and location of GBC give it a distinct advantage to integrate with national and regional
markets—with a natural-ethical production brand premium. This potential can be
realized through good policy and planning, putting private sector in the lead, and
making government and civil society actors as their allies and co-beneficiaries.
The purpose is to create private sector jobs and sources of income, by removing key
barriers on energy and PURE development. This will be achieved through investing in
hydropower and associated demand-based PURE activities that add value to local
resources, such as processing and marketing of dimensional stone, speciality food, and
certified green wood products, and provision of electricity to existing hospitality,
telecommunication and other allied services that presently don’t have access to reliable
hydroelectricity.
3. INVESTMENT PROJECTS
The focus of this investment project is on hydropower generation and productive uses.
The investment project envisages creation of five PURE clusters in as many locations
around core energy projects, mostly MHPs. Each PURE cluster is designed to capture
value from proven resources and key advantages of that cluster (Table 14).
The idea of microeconomic clusters is to nudge these areas towards specialization.
Clusters are geographic concentrations of inter-related businesses and business services.
Cluster development initiatives are an important new direction in economic policy, and
this approach may be relevant to AKRSP for building on its earlier efforts in rural
marketization.
Carbon development linked to MHPs can also be a PURE activity, but requires a
separate PoA, or linked to the existing CDM project by AKRSP, or another project
currently under development by the government of GB. This report does not cover
carbon development potential of GBC.
37. 30
Promoting enabling policies, upgrading technology and skills, increasing market access,
and improving financial services will be integral to the project. Another key result of the
project will be creating an investment model suited to GBC that is profit-oriented but
also takes into account social and environmental externalities.
Table 14: Summary of Business Clusters
# Location Households MHP Targeted PURE Businesses
1 Border economy
cluster, Gojal, Hunza
1500 Misgar, 1
MW*
Marble mining and processing
Storage and quarantine facility for
fresh fruit export to China
Yak meat cold chain, as a speciality
health food product
Vodka/beer production from local
potatoes and barley
2 Green economy
cluster, Ahmadabad,
Hunza
500 Ahmedabad
Phase II, 0.5
MW
Marble mining and processing
Certified greenwood products
Supply to existing hotels and
telephone towers at Karimabad
3 Tourism and stone
craft cluster, Shigar,
Baltistan
1500 Yasaro, Shigar
Phase 1 MW
Marble and serpentine mining and
processing
Buckwheat processing as a health
/speciality food product
Supply to existing Shigar Palace
Residence (tourism)
4 Wool /meat
processing cluster,
Mastuj, Chitral
1500 Garam
Chasma, 0.5
MW
Wool processing
Food processing
5 Feed-in to mini grid
in Chitral Town
1000 Chitral, 0.800
MW
IPP, feed-in to mini-grid to support
existing enterprise
*In addition, a shovel-ready 2 MWproject is already included in government plans, but delayed due to shortage of
public funds. An option is to fast track this as a PPP project.
4. HYDROPOWER FOR PRODUCTIVE USES
4.1 Situation Analysis:
As described in the background sections of this report, the hydropower potential of GBC
is well known, but generation is far below the current demand even for basic services.
Lack of grid connection and industrial uses act as the main barriers on investment. The
main findings are summarized in Table 15.
Under the proposed investment
project, about 5.3 MW of
hydropower will be generated from
five MHPs, to support as many
PURE clusters. These mini-grid
connected project sites are identified
by AKRSP through stakeholder
consultation, and for their proximity
to specific resource and market
opportunities across the border in
China. Other important factors, such
as access and infrastructure, future
growth potential, community capacity
and goodwill, and support from local government have also been taken into account.
Table 15: SWOT Analysis
Strengths:
- High potential for
hydropower generation
- Considerable experience
in community-based
MHPs
Opportunities:
- Use of high-end
technology
- Potential for energy-
intensive productive
uses
Weaknesses:
- Low-end technology
- Off-grid/ low commercial
uses
Threats (under current
scenario):
- Unemployment
- Energy inflation
38. 31
About 40% of net energy production, based on 50% plant load factor, will be used for
the associated PURE activities. The remaining energy will be available for domestic
uses, home based and other income generation activities, and for social uses, such as
education. The energy produced in Lower Chitral will be fed to the mini grid for Chitral
Town.
4.2 Business model/strategy:
AKRSP has previously employed two business models. In the first model MHPs were
built in isolated off-grid villages with donor grants and sweat equity of user
communities. Project committees set up by community organizations maintained and
collected a flat tariff from member users.
The second model focused on higher capacity MHPs above 500 kW. These were
financed through a combination of donor grants (50%), community equity in cash
(20%), and debt financing secured against carbon revenue and AKRSP guarantees.
These MHPs were managed as community-based utilities in mini-grid connected areas.
Under this proposal the business model has been further refined, in which AKRSP, or a
special instrument created by it, may proactively seek investment and partnership
opportunities with other institutional partners, in the private, community and
government sectors. A key part of this strategy is technology, skills and business
development.
4.3 Cost/Benefit analysis
Assuming 40% plant load factor, the total annual energy production is estimated at 13.3
m kWh. The total capital investment is PKR 730 m, while total O&M cost is PKR 440.
The mean energy use per year for targeted and other PURE activities is estimated to be
7.3 m GW/h and consumption for domestic uses is 7 m GW/h valued at PKR 95.7 m at
an average tariff rate of PKR 7.2 per kW/h in the initial years. The average IRR is
11.84% over 20 years.
The following Table summarises cost/benefit ratios and return of investment over a 20
year
Table 16: Profile ofFive MHPProjects
MHP Features
Misgar A.Abad Shigar Chitral
Town
Garam
Chashma
# of Households 1250 500 1000 2000 500
Installed capacity (kW) 1000 500 1000 800 500
Average plantload factor (%) 60 60 60 60 60
Demand structure (GW/h) 105 53 105 84 53
Productive uses and commercial (GW/h)
Private households andservices (GW/h)
Average tariff rate (PKR/kWh)
54
51
7.2
28
25
7.2
54
51
7.2
44
40
7.2
28
25
7.2
Technical data on MHPs16
Total investment cost (PKR m) 192 96 192 154 96
Total O&M over 20 years (PKR million) 118 56 118 90 59
Estimated total revenue (PKR million) 785 373 785 598 393
Total energy production cost (PKR million) 310 152 310 244 155
IRR (20 year)
Energy production cost (PKR/kW/h)
11.71
2.95
11.94
2.87
11.71
2.95
12.23
2.90
11.71
2.92
GHG emission reduction (tCO2) 21 yrs17
16
To be worked out after detailed surveys
17
Project additionality
39. 32
4.4 Strategic steps:
The main results to be achieved are construction of 5 MHPs as sub projects and building
support infrastructure, including distribution lines and link roads, where necessary, and
to arrange financing.
Key steps are:
Developing detailed feasibility studies and financial plans for the proposed
subprojects, linked with social and productive uses
Appraisal of technology options, both locally manufactured and imported, and
final selection keeping in view downstream benefits of using robust technology
suited to local conditions
Working with private sector manufactures and suppliers of technology, such as
turbines and electric-load controllers (ELCs), and linking them with certified
sources of new technology
Exploring investment options, including the feasibility to attract local investors,
and developing crowd-financing options for members of community and Local
Support Organizations (LSOs)
Coordination with relevant public sector departments and local policy-makers
and developing feasible PPP models, suited to GBC and promoting awareness
among communities for productive and social uses of renewable energy.
5. BORDER-ECONOMY CLUSTER AT GOJAL, HUNZA
5.1 Significance
Gojal or Upper Hunza forms Pakistan’s northern most borders with Afghanistan and
China in the northeast. Until Attabad disaster18
, Gojal had been developing at a rapid
pace and was recognized as a role model community for its social and economic
progress and environmental awareness. The local economy was driven by the Dry Port
at Sost, border trade with China, international trophy hunting, community share in the
entrance fees to Khunjarab National Park, and tourism and transportation services on
KKH. People in Gojal, with the highest education rates in the area, were also the early
adopters of new agricultural technologies and the largest suppliers of high quality seed
potatoes in Pakistan.
Gojal had seen remarkable transformation from its historical isolation and subsistence
pastoral economy within a few decades. According to recent AKRSP research,
households in Gojal ranked among the highest in educational attainment and consumers
of social services, such as education, from pre-school, all the way to university level
without gender discrimination, and child and maternal health. The Gojali community,
which includes two ethnic groups, Burusho and Wakhi, are also regarded as a model of
tribal coexistence, most educated, resilient, egalitarian and forward-looking people in
GBC.
The economic basis of this best community development practice has suddenly failed,
due to a single natural occurrence, the Attabad landslide and the formation of the Lake.
18
On January 4, 2010, a landslide destroyed several villages, blocked theHunza River and formed a 22-km Lake,
submerging many more villages and sections of KKH, this cutting off Gojal from the rest of Hunza. The disaster
remains unmitigated despitemany attempts and many hundred millions of rupees to unblock theriver and drain the
lake. It will take several years and billions of rupees to realign theKKH.
