The Central government is scrutinising the steep escalation costs of 330-MW Kishenganga power project. The project proposed on a tributary of river Jhelum in Gurez Valley is proving to be a non-starter due to 68 per cent cost escalation. While modifying the design of the project by reducing storage, Union Cabinet had approved the project at the cost of Rs. 2238 crore in July 2007. But, even after eight months since the Cabinet approval the major works could not be awarded due to high price bids. Sources in the National Hydro-Electric Power Corporation (NHPC), the executing agency confirmed that a revised cost estimate amounting to Rs. 3733.53 crore has been submitted to the Union Ministry of Power. Surprised at the steep cost escalation of Rs. 1533 crore within few months of approval, the Central government has asked the Central Electricity Authority (CEA) to scrutinise the estimates. The NHPC in a note to the government has called for an immediate review of the project lest Pakistan starts construction on the 969MW downstream Neelam-Jhelum project on the same tributary. According to the Indus Water Treaty (IWT), whoever builds the project first will have the first rights on the river water. Recently Pakistan awarded the contract for a $1.5-billion to a consortium of China's Gezhouba Water and Power Company and China National Machinery and Equipment Import and Export Corporation to build 960MW project in eight years. Against the estimated Rs. 1336 crore cost for turnkey package, the NHPC received the lowest bid of Rs. 2960 crore. Officials said they were still negotiating with the lowest bidder. The new minister of state for power Jairam Ramesh has assured the NHPC top brass that his ministry will seek fresh approval from the Union Cabinet. "Now that Pakistan has begun work with the help of a Chinese firm, we have to put our project on a fast track," said the minister. An NHPC official attributed increased cost to the higher risk associated with the project due to difficult geology and its proximity to LoC. He said apart from these factors, the Kishenganga project has a heavy silt load. India and Pakistan have been locked in a dispute over the project for years. Kishenganga or the Neelam River is the largest tributary of the Jhelum. Pakistan believes that this project will not only impact its hydro-power potential but will also adversely affect the agriculture in the Neelam valley and Muzaffaraabd district. Though, India has minimized the storage limits by reducing dam height, the project envisages diverting river Neelam. As per the plan, the tributary instead of joining river Jhelum at Muzaffarabad will be diverted to rush into the main river at Wullar Lake. The project involves construction of a 35.48 m high concrete faced rockfill dam and a underground powerhouse. Meanwhile, in Srinagar chief of Peoples Democratic Party (PDP) Mehbooba Mufti has asked New Delhi to compensate Jammu and Kashmir on account of the Indus Water Treaty. She described the Treaty as "discriminatory" and blocking the progress and economic development. She also came down heavily on the New Delhi-owned NHPC for its "arbitrary exploitation of the state's water resources. In a statement, she said the NHPC was producing 1500 MWs of power from its projects in Jammu and Kashmir. But, it was sharing just 180 MWs with the state and the rest was being supplied to the northern grid for the states of Delhi, Rajasthan, Haryana, Punjab and other states.