May 19, 2020

Inquiry body recommends recovery of Rs100b from owners of power plants


ISLAMABAD: The inquiry committee has recommended to recover Rs 100 billion immediately from the owners of power plants and review the signed agreements for installation of a power plant in the country, Pakistan Today reliably learnt on Saturday.

According to sources, a nine-member committee has submitted a detailed inquiry report to Prime Minister Imran Khan regarding more than Rs 100 billion losses of the power sector. They said that this 278-page inquiry report has disclosed that the cost of the installation of power plants by independent power producers (IPPs), and under government to government (G to G) agreements, power tariff, corruption in their fuel consumption, violation of merit order, guaranteed profit in dollar, and certain conditions of power purchase etc are the major reasons  behind heavy losses to the national exchequer. 

They said the inquiry committee has submitted an inquiry report titled ‘Committee for power sector audit, circular audit reservation and future road map.’ The inquiry committee has scrutinised the documents pertaining to the cost and tariff of more than 60 power plants and submitted an inquiry report without any single note of dissent as all members of this committee have submitted their signature on the report”, said sources.

Prime Minister Imran Khan had formed a nine-member committee headed by former chairman Securities and Exchange Commission of Pakistan (SECP) on August 7, 2019. The inquiry committee included the offices of eight organisations including Inter-Services Intelligence (ISI), Federal Investigation Agency (FIA) and SECP as members.

Sharing findings of this inquiry, the sources said that the owners of IPPs have unjustly obtained Rs 350 after 1994 as the National Electric Power Regulatory Authority (NEPRA) has approved 15 per cent profit for the power plants under the government policy while these power plants were found earning 50 percent  to 70 percent profit annually. They said that the inquiry committee has recommended to immediately give an end to the formula of capacity payment based on take or pay with owners of IPPs and recovery of Rs 100 billion from the owners of IPPs.

According to the informed sources, owners of power plants had shown extra cost of their power plants and got approved extra tariff while NEPRA and all other organisations concerned did not verify the cost through independent ways. They said that the owners of power plants had got approved heavy tariff from NEPRA by showing Rs 2 billion to Rs 15 billion extra cost of the plants as Rs 30 billion extra cost of a coal power plant was shown in the record. The cost of the power plant was accepted by the authorities concerned which was prepared by the companies, said sources quoting findings of the report.The sources also said that the government and power consumers are forced to pay billion of rupees annually either the power plants are closed or produce low electricity due to cut in power demand. And, it is only because of the power purchase agreements with owners of power plants on a take or pay basis. They said the government is bound to pay Rs 900 billion to power plants under the head capacity payments while it will have to pay a capacity payment of Rs 1,500 billion by 2025. They said one sided agreements with owners of power plants have so far caused unbearable loss to the country’s economy, national exchequer and common public and at present they are unable to bear more burden of capacity payments while electricity will become more expansive if already agreed capacity payments are made.

It is also learnt from sources that the inquiry committee’s report has transpired that owners of power plants have been earning unjust profit by using less fuel in power generation while NEPRA has never conducted efficiency audit (fuel consumption audit) of the power plants as influential owner of power plants have never permitted to conduct such audit by using different tactics. Likewise, the power sector’s circular debt has crossed Rs 1800 billion due to wrong agreements, while owners of power plants have been earning 50 percent to 70 percent profit and there is no example of earning such a high ratio of profit on installing a power plant around the globe. 

Moreover, though the guaranteed profit should not be for more than four to five years, the government and NEPRA has granted guaranteed profit for 25 years, while it is largely believed that owners of power plants extract their investment within one or two years due to high profit ratio and wrong submission of cost of power plants. Large numbers of power plants have been installed by offshore companies, the sources said.

Quoting findings of the inquiry report, the sources further said that the committee has recommended forensic audit of the cost of power plants installed after 2002 and verification of the cost of the same technology power plants which were installed in various countries of the world.

The sources concerned said that Imran Khan has earlier given a three-month time to the inquiry committee to complete the inquiry into the matter. However, the inquiry committee took eight month to complete the inquiry and submit a report to the PM due to different hurdles in obtaining documents of the power plants, and the entirely technical nature of the investigation. They said that a detailed presentation in this regard has been given to the PM and recommended to collect Rs 100 billion immediately from owners of power plants and review in the agreements with owners of power plants. 

It is pertinent to mention that premier has shown grave concerns over the menace of sky-rocketing circular debt, expansive electricity generation and high electricity tariff several times and asked to minimise it to an appropriate level.

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