Despite ‘no objection’ from NAB: Bureaucracy refuses to execute revised deals with IPPs

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Shafaqna Pakistan: After the NAB letter to the Power Division which says the government has the full authority to execute its revised deals with IPPs, the top bureaucracy of both the power and finance divisions is not ready to implement the altered contracts, arguing the anti-graft body didn’t so far validate the process of negotiations and agreements inked with the IPPs.

The NAB in February 2021 took suo moto of the whole negotiations and signing of MoUs, Master agreements and revised power purchase agreements (PPAs) and got hold of all records for due diligence, saying it was already investigating some IPPs which minted excess profits.

“Top officials of the finance and Power Division want from NAB the validation of the whole process of negotiation and the altered contracts with IPPs, saying the anti-graft body’s letter is not enough to ward off their apprehensions. They do not want to face any action by NAB in future after implementation of the revised contracts,” a senior official who attended the ECC meeting while quoting the top officials of power and Finance Division as saying.

After getting hold of the whole record of agreements, the Power Division earlier requested the NAB to examine the process of negotiations and agreements with the IPPs for validation. The NAB in return informed that they have received the said agreements but have neither informed that the same have been examined nor have validated these, stating that execution of the contracts by any Ministry does not fall into the ambit and purview of Section 9 of NAO. “This is where the bureaucracy decided not to implement the revised agreements unless NAB clears the whole record of negotiations and agreements.”

In the ECC meeting that was held here on Wednesday with Federal Minister for Finance, Revenue, Industries and Production, Muhammad Hammad Azhar in the chair, the Power Division had pitched a summary seeking suspension of payment to all IPPs installed under the power policy 2002 till the conclusion of probe into excess profits of some IPPs. The Power Division, in its summary, also asked for suspension of the process to form a local arbitration tribunal to resolve the issue of excess profits of Rs55 billion that 12 IPPs have alleged to have minted.

The summary also recommended that the FBR may review the matter of taxation of contractors at the rate of 4 percent of relevant payment and determine whether the allegations about the IPPs installed under the power policy 1994 are based on fact and if any recoveries are due to be paid by the relevant IPPs.

The government has already defaulted to nine IPPs set up pre and under the 1994 power policy on March 29 on payment of Rs85 billion (40 percent of their) dues because of the fear of NAB. The Power Division wants from the NAB clearance of the revised deals as soon as possible as it has a 70-day period to cure the default. Unless and until NAB completes its probe against some IPPs and clears the altered deals with IPPs, it is simply impossible for the bureaucracy to execute the contracts.

However, the ECC deferred the summary with the Chair of the meeting, saying the materialization of revised contracts with discounted tariff of Rs836 billion is imperative and asked the relevant authorities to come up speedily with solutions paving way to implementation of new contracts. However, the summary to the ECC mentions that the government negotiation committee signed the MoUs with IPPs and its report was considered and approved by the Cabinet Committee on Energy and ratified by the cabinet, and subsequently an Implementation Committee was constituted to convert the above-referred MoUs into binding agreements.

“The Cabinet Committee on Energy (CCoE) and ECC considered the report by the Implementation Committee, mandated to convert MoUs into binding agreements, and approved the payment mechanism and agreements with IPPs in meetings held on 8th February 2021.The said decisions were ratified by the cabinet on 9th February 2021. And the agreements with 32 IPPs have been signed on 11th, 12th, 16th and 19th of February 2021.

However, the National Accountability Bureau (NAB) has stated that the Bureau is conducting an investigation into the allegations of corruption and corrupt practices against the management of Nishat Chunian Power Limited (one of the Power Policy 2002 IPPs). Since the inquiry has been converted into an investigation, NAB has asked for provision of record and the present status of MoUs and agreement signed and final negotiations between the IPPs and GOP under Section 1 9 of National Accountability Ordinance 1999. Summary says that the relevant record has been provided to the NAB Lahore.

After that, the Power Division requested the NAB to examine the process of negotiation and agreements with the IPPs for validation. The NAB in return informed that they have received the said agreements. But it is not known if the same have been examined and validated. The execution of the contracts by any ministry does not fall into the ambit and purview of Section 9 of NAO. This is where the bureaucracy decided not to implement the revised agreements unless the NAB clears the whole record of negotiations and agreements.

Since NAB is apparently conducting investigations into the issue of excess profitability, this matter relates to IPPs of Power Policy 2002, it would be appropriate to wait for the conclusion of NAB investigations before proceeding further with payments to the IPPs or Power Policy 2002.

The News (Writer: Khalid Mustafa)

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