ISLAMABAD – The government has withdrawn its proposed dam cess from the Finance Bill 2025-26 after failing to secure approval from the International Monetary Fund (IMF). Talks with the Fund on the issue remain ongoing, with the government seeking to raise funds for the Diamer-Bhasha, Mohmand, and Dasu hydropower projects.
The Federal Board of Revenue (FBR) had floated the idea to expedite dam construction and strengthen Pakistan’s water storage capacity, especially in light of India’s increasing manipulation of river flows from Jhelum and Chenab. Pakistani authorities argue that India has effectively suspended the Indus Waters Treaty of 1960 and has repeatedly restricted downstream flows, particularly during critical crop-sowing seasons.
Government officials stressed to the IMF that this water manipulation by India, particularly under the Modi administration, constitutes a serious national security and food security concern. They highlighted that such interference disrupts agricultural productivity in Punjab and Sindh, especially during winter when natural water flows are already limited.
Currently, Sindh’s Irrigation Department has warned farmers of drastic water shortages. Irrigation has been cut by 90%, with areas previously receiving enough water for 400 acres now only able to irrigate 40 acres.
Officials believe rapid construction of dams is the only sustainable way to mitigate India’s upstream controls and avoid future water crises. If IMF approval is granted, the government plans to introduce the dam cess either through a supplementary budget or a presidential ordinance.
Regarding the collection mechanism, authorities are still finalizing whether the cess will be recovered via electricity or gas bills. Another proposal from the Ministry of Water Resources suggests convincing provinces to allocate part of their NFC shares to create a Dam Cess Fund, ensuring consistent annual financing for critical infrastructure.
Despite its urgency, the dam cess remains in limbo until the IMF gives the green light. Officials maintain that this funding stream is vital for Pakistan’s long-term water security and agricultural resilience.
