Arbitration agreement not finalized: Govt, KE differ over ‘Shariah’ definition

ISLAMABAD: The Federal government and Karachi Electric (KE) on Friday failed to finalise arbitration agreement on the receivables/ payables due to differences on definition of word “Shariah” and the exact amount that was part of the draft Terms of Reference (ToRs) shared by the power utility, well-informed sources told Business Recorder.

This was the crux of an inter-ministerial meeting held in the Ministry of Privatisation and attended by senior officials of Petroleum Division, Power Division, Finance Division, SSGCL, CPPA-G, NTDC and KE's management.

KE in its draft ToRs had proposed that arbitration should be based on equity, fairness and Shariah. Power Division implied that KE wants all the contracts, i.e., Gas Supply Agreement (GSA), Power Purchase Agreement (PPA), to be ignored while making a settlement deal.

Power Division had also sought comments of Attorney General for Pakistan before moving towards arbitration.

The sources said KE has been asked to revise ToRs and exclude words like “Shariah” and submit the new document by Monday next so that issues are resolved as early as possible.

"We have asked KE to replace the word ‘Shariah’ with ‘laws of Pakistan’,” said an official on condition of anonymity.

The sources maintained that as KE submits new ToRs, these will be circulated to the concerned stakeholders for their comments and early resolution of issues as Prime Minister wants the issues to be sorted out immediately.

According to a senior official of Power Division, KE communicated to the government in its amended draft 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 the principal amount. It would be hard for the Ministry of Finance to accept this condition in the ToRs, according to the official.

KE further argued 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.

KE is unlikely to ensure power supply in summer if these issues are not resolved and a GSA is not signed with SSGCL for supply of RLNG to its new plant.

Copyright Business Recorder, 2021