Rental Power Plants, A New Battle Arising

By: Ahmad Ahmadani

The government and Supreme Court of Pakistan might lock horns over another controversy regarding Rental Power Projects (RPPs), as the apex court is set to hear a related suo moto case today (Tuesday) while the Prime Minister is likely to give approval of advance payment to RPPs to the cabinet.

After finding no solution to end or reduce energy crisis growing with each passing day, the Power Ministry has sent a summary to the federal cabinet seeking hefty amount of Rs 2 billion for advance payments to only two 135-MW Rental Power Projects (RPPs) named as Kamonki Rental Power Project and Sialkot Rental Power Project, sources privy to the development revealed on Monday, adding that though the Finance Ministry has declined to provide this hefty amount for both RPPs, yet this is included in the agenda of upcoming special meeting of the federal cabinet likely to be held tomorrow (October 12). The federal cabinet would give go ahead to Water and Power Ministry to initiate these both RPPs to meet the energy crisis, the sources said.

However, on the other hand, a suo moto on the much debated RPPs will be taken today by the Supreme Court of Pakistan and it is likely that SC would stop the government to initiate another adventure which has already played with the over burdened general public bearing the brunt of such irrational decisions of Pakistani government.

It was also learnt that PEPCO has apparently assured the Water and Power Ministry to provide the advance payments for both RPPs. Sources were of the view that Power Ministry despite failing to give due payments and Furnace oil in time to the Independent Power Plants (IPPs) of the country till this effect, however, it is gearing up its serious efforts to get the final nod in this regard from the federal cabinet during next meeting of the cabinet focusing on energy crisis to be chaired by the Prime Minister Syed Yousuf Raza Gilani.

It is testimony of the fact that the federal cabinet on 21st September turned down this very summary seeking advance payments to both RPPs after finding no comments from the concerned ministries. Further, the generation capacity of Kamonki RPP is 65MW and Sialkot RPP is 65MW, which in total of both would be 135MW but it is ironic to learn that Lakhra Power Generation Company Limited (state-owned) could not provide Furnace oil to 232MW Karkey Rental Power Project that is operational from last seven months to meet the demand and supply gap of electricity caused long hours load shedding in the country. Additionally, Asian Development Bank in its report on RPPS has recommended review or to make an end to this very idea, sources said.

Rental power plants were set up to meet short-term and emergency requirements of the country. Rental periods are normally 5-7 years depending on the country’s need. Rental power plants have been set up in the US, UK, India, Bangladesh, Kuwait, Sri Lanka, Turkey, UAE, Saudi Arabia, Iraq, Palestine. The concept was introduced in Pakistan in 2007.

Economic pundits when contacted argued that rental power project may be a viable option to lessen electricity demand-supply gap over the short run, but there is a need to reconsider whether burdening the economy with makeshift (and palatial) thermal energy. They were of the view that RPPs had seemingly contributed disadvantages so far as oil bills had increase; gas reserves were depleting very fastly, and high tariffs while producing electricity from rental power plants. Only spending amount on rehabilitation of existing generators and promoting energy conservation can give out positive outcomes, they opined. “Now Pakistan People’s Party led coalition government has opted the option of using Rental Power Plants (RPPs) to overcome persistent electricity crisis that is not only causing great amount of hardships for the fellow citizens but also hitting hard to country’s economy, they said, adding, that In recent past there was much hue and cry from political and other circles over alleged kickbacks in deals of RPPs.

Pakistan Muslim League-Nawaz had already announced to issue a ‘White Paper’ on RPPs while another political party-Pakistan Muslim League (Q)- was also at the forefront in highlighting alleged wrongdoings in the execution of RPPs, they said.

According to them, it is incorrect to suggest that rental power costs are substantially higher than that of IPPs. Due to different tariff of rental plants, even after taking into account the high fuel costs, the cost difference is almost equal or marginally higher in case of RPPs. Compared with IPPs, RPPs power generation cost ranges between 12-13 cents per KWh, and IPPs’ power generation costs approximately 12 cent per KWh. But, the government circles are of the view that mere blame game is going on just for the sake of leg pulling. There is nothing wrong in RPPs and the only viable option to get rid of load shedding is rental power plants, they believe.

However, critics of RPPs are of the sanguine view that highly controversial RPPs had proved fruitless resort to overcome the power crisis, which has hit hard the economic growth of the country besides adding salt to public miseries at large. RPPs would not only fail to meet rising electricity demand but also add burden to the national exchequer in general and power consumers in particular. The public is justifiable in questioning that if RPPs are the option, why it is adopted too late? they questioned.

Rs 300 billion corruption but NAB fails to respond

By Ansar Abbasi

ISLAMABAD: On the eve of a new global report on corruption, the Transparency International Pakistan has claimed that the TIP alone has identified corruption cases worth Rs 300 billion in different federal government departments during one year.

Talking to The News Chairman TIP Adil Gilani lamented that the government did not show any interest in probing these cases of corruption. He, however, said that it was only the Supreme Court of Pakistan, the Public Accounts Committee of the National Assembly and the PPRA, which took notice of some of these corruption cases.

He explained that generally the identified corruption cases involved violation of the Public Procurement Regulatory Authority (PPRA) Rules of 2004. The Transparency International is releasing its report on Tuesday at 2 pm amid indications that Pakistan is all set to hit further lows amongst the world’s most corrupt nations. The 2009 report showed Pakistan climbing five numbers from the previous 47 to become the 42nd most corrupt country in the world.

Gilani expressed his disappointment that there was no effective accountability apparatus presently operational in Pakistan due to which corruption was on the rise. He explained that the TIP referred a number of corruption cases to the NAB but it did not proceed even in one single case.

Amongst the mega corruption cases, he said the Rental Power Projects of the government, presently under the scrutiny of the Supreme Court of Pakistan, was on the top. He claimed that under the Rental Power Projects, the government awarded 14 contracts in violation of the PPRA rules as also stated in the ADB report, causing a loss of over US$ 2 billion. He said that the TIP had also written to the apex court on this case of massive corruption and irregularity.

He said that the TIP also wrote to different authorities about corruption in Pakistan Steel, whose sale policy and procurement had caused reported loss of Rs 22 billion. This corruption case, though ignored by the government, had taken been up by the Supreme Court of Pakistan.

Gilani also talked of the alleged violation of Pubic Procurement Rules 2004 by Pakistan Railways in the tender for procurement of 150 locomotives, only US made, which might have caused a loss of at least Rs 40 billion to the national exchequer. The project, he said, is presently on hold.

Regarding the OGDCL, which made headlines in the recent past when Prime Minister Gilani appointed his jail mate and a convict who was not even a graduate as its managing director, Gilani said that the TI had also reported to the government authorities about the purchase of compressors for $30 million for Qadirpur Gas Field without inviting public tenders from M/s Valerus, which is a violation of the Public Procurement Rules 2004. He said the TIP also reported another violation of the Public Procurement Rules 2004 in tender for supply of rental drilling rigs costing the Government of Pakistan Rs 3 billion per year. He added that the Trading Corporation of Pakistan awarded contracts at exorbitant rates to cartels of Stevedores and Transporters in 2009, wheat and fertiliser, causing loss of over Rs2 billion.

Regarding the Trade Development Authority of Pakistan (TDAP), he said, it saved a claim of US $2.2 million for extra/additional work to the contractor of Expo 2010-Shagnahi, China, which was also supported by the Ambassador of Pakistan in China. On TIP objections, he said, the TDAP rejected the claim.

About the National Insurance Corporation Limited (NICL), he said, the TIP identified a case of purchase of 803 kanal-19 marla plot in Dubai’s Liberty Tower at the rate of UAE Darham 2,750 per square feet against the market price of AED 1,200 per square feet. Alleged loss to exchequer in this case, he said, was Rs 900 million. In another case, 10-acre plot was purchased in Korangi Deh Phihai, in August 2009 at the rate of Rs 90m per acre, against maximum market price of Rs 20m per acre. It caused a total loss of Rs 7 billion.
In yet another case pertaining to the NICL, land was purchased in Lahore in 2009 for Rs1.5 billion against market value of Rs 30 million. It caused a loss of Rs 1.2 billion to public kitty.

In case of EOBI, he said that the TIP challenged the EOBI to invest in one of the four Centaurus Towers in Islamabad and the Intercontinental Hotel, Islamabad. The EOBI was also purchasing Karachi-Hyderabad Motorway and investing Rs 27 billion against the provisions of EOBI Act but the PAC later stopped this move.

Regarding the NHA, he said that according to the AGP Report 2008 NHA has irregularities of Rs 29 billion out of Rs 42 billion annual fund. He said that after eating away its annual development budget of 2010, now the NHA intends to reconstruct the M-9 Karachi-Hyderabad through some other investment. It needs Rs 27 billion for the project. He said that the NHA management planned to use EOBI funds for M-9.

Gilani said that Zafar Iqbal Gondal (brother of a PPP minister), who was Member Finance NHA, has been transferred and posted in January 2010 as Chairman EOBI. Asad Ullah Shaikh, another PPP appointee, who refused to allow Rs 27 billion to be used for a losing project, was sacked to make way for Gondal. He said that after these changes, the EOBI made a proposal to become a partner of the NHA on the M-9 under the Public Private Partnership Scheme of the GoP as BOT (built, operate & transfer) Project, based on the recovery of toll tax.

Gilani said that nowhere in world, road projects on BOT basis are financially viable but still the EOBI decided to own M-9 and build it. In 2005, he said, the board of trustees of the EOBI had decided to invest in the real estate. He added that for this purpose, PRIMACO (Pakistan Real Estate Investment and Management Company Ltd) was established, which is a wholly owned subsidiary of EOBI. PRIMACO has been registered with Securities and Exchange Commission of Pakistan (SECP) and this company has launched many real estate projects.

The PRIMACO, he said, has overstepped its mandate and prepared a proposal for the EOBI to build the M-9 at Rs 27 billion. They have also proposed to make the NHA as executing agency for award of consultants and contractors’ contract, total 10 numbers, and appoint PRIMACO as project managers of this project. The NHA, he said, has already awarded 10 contracts to blue-eyed contractors and consultants, without public tendering, biggest being Rs 4 billion contract to one contractor against PPRA Rules, and are awaiting approval of the EOBI to send an official letter of government approval to proceed. According to the EOBI Act and rules, he said the EOBI cannot invest public pension funds in an infrastructure project. The EOBI under Rule 2 (i) can invest two-and-a-half per cent of the portfolio. The EOBI’s current portfolio is around Rs 120 billion, minus billion of rupees losses in share market. This means only Rs 1.8 billion can be invested in M-9. But M-9 is a Rs 27 billion project.

Gilani added that in July 2010, the TIP wrote a letter to the NHA for its failure to obtain CAR, (Contractor All Risk Policy) from the NLC Northern Bypass Shershah bridge contracts causing the exchequer to pay Rs 170 million for the reconstruction of the bridge.

Additionally, contracts in 2008 & 2009 worth Rs 467 million, Rs 203 million and Rs 124 million were awarded to NESPAK in violation of Public Procurement Rules 2004. Gilani added that none of the contracts awarded by the NHA in the last two years are in compliance with the Public Procurement Rules 2004. In case of PEPCO, the TIP chief said that it reported Rs 2-2.5 billion corruption in purchase of 30 million energy saver bulbs scheme costing Rs 6 billion.