IPPs enjoy corporate tax exemption while RPPs don't: Pirzada

KHUDAYAR MOHLA

ISLAMABAD: The Chief Justice of Pakistan on Wednesday observed that "we are cautiously saying that money has been pocketed in the award of RPPs contracts." A two-member bench comprising Chief Justice Iftikhar Muhammad Chaudhry and Justice Khilji Arif Hussain has been hearing petitions filed by federal minister Faisal Saleh Hayat and PML-N MNA Khawaja Asif who have alleged rampant corruption in the award of contracts for RPPs.

During the hearing, the counsel for Gulf Rental Power Project of Sialkot, Barrister Syed Ali Zafar; counsel of Kamoki Energy Limited (KEL) and Reshma Power, Abdul Hafeez Pirzada; Nepra's counsel Syed Najumul Hassan and Khawaja Asif appeared before the bench. Former Federal Minister for Water and Power Raja Pervez Ashraf was present in the court throughout the day-long hearing of the case.

The counsel for Gulf Rental Power Project of Sialkot submitted before the bench that Gulf Power was awarded a contract for setting up a rental power plant following a due legal process in a transparent manner.

He added that the government of Pakistan devised a medium-term rental power policy to bridge the widening gap between demand and supply of electricity keeping in view the fact that IPPs would take more than 5 years to come on line.

He submitted that the sponsors of Gulf Power considered Pakistan a safe and viable country for investment and responded to Private Power & Infrastructure Board's invitation for international bidding that appeared through advertisements in newspapers in 2008.

He pleaded that Faisal Saleh Hayat and Asif Khawaja had brought an important issue to the court's notice in which two kinds of projects - some unsolicited while the others awarded through competition - were involved.

Giving details of the project, the counsel informed the bench that Gulf Power's bid for a 62MW plant was examined both on technical and financial ground before it was approved by PPIB.

He submitted that his client's final bid of 3.42 US cents (Rs.2.46) per kWh (kilowatt-hour) was the best price as compared to any rental power plant in the country as well as in the region.

He said that Gulf Power was required to achieve commercial operations and produce electricity before the end of April 2010. According to him, the Gulf Power attained the target well in advance.

On the occasion, he presented a report before the bench, worked out by KEMA International, showing that a team of independent experts had given approval certification of plant completion, acceptance of equipment and guarantee of electrical output. According to the report, it is the only power plant in Pakistan which has been providing guaranteed electrical output to the national grid since 2010.

He further submitted that Gulf Power had repaid mobilization advance of US$ 991,666.65 to GENCO 3 and would continue to run at full load till the end of the project.

On his turn, Abdul Hafeez Pirzada apprised the bench that KEL Gujranwala successfully participated in an international competitive bidding conducted by PPIB in accordance with the Request for Proposal for a Fast Track Rental Power Projects during December 2008.

However, he said, the KEL also submitted required Performance Guarantee on June 26, 2009 in an amount of US $ 369,600.

He further contended that KEL spent Rs411 million from its own finance to run the project, adding that Kamoke plant was solicited through international bidding.

Pirzada asserted that Nepra approved reference tariff on May 12, 2009. According to him, machinery has been imported in accordance with a settled criteria of Nepra.

Replying to a CJP's query, Pirzada told the bench that tariff rate in the project was 5.10 US cents per kWh which was equal to Rs 4 and the total rate per kWh after adding the fuel price to it was Rs 11.

He categorically stated that IPPs were given exemption of 35 percent of corporate tax along with many other incentives whereas RPPs were not exempted from corporate tax.

Advocate Raja Anwarul Haq represented Techno Energy in Sahiwal and Techno E in Faisalabad and prayed that a 'fake' proposition was presented before the apex court which led to halt operation at both the projects.

The CJP questioned why a review petition was not filed in the case.

The court adjourned the hearing till Nov 3 (today).