FCC Orders Nai Gaj Dam Contractor to Complete Work Under Original Contract Terms

Pakistan's Federal Constitutional Court (FCC) on Monday set aside multiple orders by the Sindh High Court (SHC) that had allowed the contractor on the long-delayed Nai Gaj Dam to claim price escalation beyond the original contract, directing that all remaining work be completed strictly under the original agreement, the arbitral award, and the September 21, 2021 memorandum of understanding (MoU). A two-judge bench — headed by Chief Justice Aminuddin Khan and comprising Justice Ali Baqar Najafi — also barred all courts from intervening in the project's execution until the dam is complete.

Background: A Project Stuck in Legal Limbo

The Nai Gaj Dam is a WAPDA (Water and Power Development Authority) multipurpose project in Sindh, designed to provide both irrigation water for the province's agricultural land and hydroelectric power generation. The project has been mired in delays for years. The contractor, NEIE SMADB-LILLEY-RMS Karachi, had obtained SHC rulings permitting cost escalation beyond the original agreed terms. WAPDA contested those claims, and the dispute eventually reached the FCC through a set of appeals.

An earlier arbitral award and the September 2021 MoU had both attempted to create a framework for resuming construction. The SHC judgements, however, granted the contractor entitlements that extended beyond those frameworks — entitlements the FCC has now struck down.

What the 21-Page FCC Judgement Directs

• The contractor must complete all remaining works strictly under the original contract, the arbitral award, and the September 21, 2021 MoU — not under the SHC-expanded terms.
• WAPDA must consider and respond to any contractor request to resume work within 15 days of receiving it, provided the contractor unequivocally commits to the original terms.
• WAPDA may grant a reasonable extension of the construction period, but only under the contractual provisions that already govern such extensions.
• Any extension of time will not entitle the contractor to additional price escalation payments.
• No court — including the SHC — may intervene in the project's execution until the dam is complete, except through the dispute resolution mechanism set out in the original contract.

The court stated in its judgement that the purpose of the bar on judicial intervention is "to prevent further litigation from impeding the execution of an important public infrastructure project."

Why This Matters for Pakistan's Energy Sector

WAPDA manages a significant share of Pakistan's hydroelectric generation capacity. The Nai Gaj Dam's hydroelectric component, once operational, would add generation to a national grid that is heavily weighted toward expensive oil- and gas-fired thermal plants. Those thermal plants are the primary reason consumers see fuel cost adjustment (FCA) charges on every electricity bill — additional per-unit costs that fluctuate with global fuel prices and that have pushed household bills sharply higher over the past three years.

The project's location in Sindh also makes its completion particularly relevant to HESCO (Hyderabad Electric Supply Company), the distribution company (DISCO) serving that part of the province. HESCO's service territory contends with chronic supply shortfalls and infrastructure deficits; additional hydro capacity in the region would improve both supply reliability and long-term cost pressures for consumers there.