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ISLAMABAD: Power Division (PD) has reportedly sought opinion from Attorney General for Pakistan AGP on Terms of References (ToRs) sent by Karachi Electric (KE) for settlement of dispute on payables/receivables with public sector entities, well-informed sources told Business Recorder.

KE, in its ToRs has made two points, i.e. surrendering of principle of reciprocity and local arbitration rather than in London to convince the government.

"The offer of local arbitration instead of in London has wrongly been tailored to appease the decision makers as in fact, the power utility had never been given the right of international arbitration," the sources added.

KE communicated to the Government in its draft amended ToRs that there would be no reciprocity but at the same time, it urged the government that since the Ministry of Finance has delayed payment of tariff differential subsidy , it should now also pay a Late Payment Surcharge (LPS) of Rs 80 billion along with principal amount. It would be hard for the Ministry of Finance to accept this condition in the ToRs.

KE is also of the view that Karachi Water and Sewerage Board (KWSB) is responsible for delay in payment of Rs 32 billion, and a surcharge of Rs 29 billion is also due on this principal amount. Both Federal Government/ Provincial Government are KWSB's guarantors.

The sources explained that LPS is imposed on any customer only for one time rather than with a compound effect.

The power utility has also proposed that arbitration should be based on equity, fairness and Shariah, which implies that all the contracts i.e. Gas Supply Agreement (GSA) or Power Purchase Agreement (PPA) should be ignored while making settlement deal, the sources maintained.

Opposing the proposal, the sources said, the Federal Government has swallowed a bitter pill of Rs 122 billion LPS payment to the IPPs out of total amount of Rs 403 billion, adding that it has to be paid as per the law.

KE, sources said, is also of the view that if any recovery is due against it, the government should impose a surcharge on consumers. In case of default or delay in payment in future, this should be recovered as surcharge.

According to sources, Nepra will never allow it. The regulator always argues that if there is any incompetence on the part of the government or inefficiency in any public sector organization then why should the consumers bear the brunt of that incompetence or inefficiency.

According to the draft ToRs, KE has proposed that the parties agree that the amount determined by the Arbitrator (principal amount plus compensation) as owed by KE to any Government party or parties shall be set off and adjusted against the amount determined by the Arbitrator (principal amount and compensation) as owed by those or other Government party or parties to KE. Such adjustment shall be on the basis of the amounts that were due on the original due date.

It further says that any amount not so adjusted shall be paid by the party owing such amount within a period to be mutually agreed between the relevant parties. The Arbitrator’s award shall be final. The parties agree to abide by and implement the award of the Arbitrator and not to challenge the award before any Court or forum in Pakistan. All Government Parties, NTDC, CPPA, SSGC, GoP, KWSB and GoS expressly waive any right or claim to sovereign immunity in relation to the implementation and enforcement of any direction, order or award by the Arbitrator. Within fifteen days of the date of issuance of the Arbitrator’s award, the Government parties shall withdraw all pending litigations against KE relating to any sums owed by KE to them and KE shall withdraw all pending litigation against the Government parties relating to any sums owed by them to KE.

The draft KE's ToRs, the parties confirm, duly authorize the execution of the agreement after having obtained all necessary internal approvals for the purpose of executing this agreement.

In case of any conflict between this agreement and any provision of any previous agreement, contract, or commitment between any of the parties, whether that provision relates to dispute resolution, liability to pay interest or otherwise, this Agreement shall prevail over and supersede the provision of any previous agreement, contract, or commitment. Any dispute arising out of, related to or under this Agreement including but not limited to a dispute relating to the legality or enforceability of this agreement shall be decided by arbitration conducted in accordance herewith.

“We have sent the KE's ToRs to the Attorney General and now we will in a day or two discuss the suggestions and finalise the stance of Federation," the sources maintained. KE's ToRs have also been sent to SSGC, KWSB and CPPA-G for comments.

Copyright Business Recorder, 2021

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