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ISLAMABAD: An Inter-Ministerial Committee (IMC) headed by Minister for Privatisation has reportedly decided to place the case of KE-Arbitration agreement before the Economic Coordination Committee (ECC) of the Cabinet, as stakeholders have not evolved a consensus on several issues with financial implications, well-informed sources told Business Recorder.

This was the crux of an IMC meeting held in the Ministry of Privatisation on Wednesday.

The contents of letter written by Special Assistant to the Prime Minister on Power Tabish Gauhar also came under discussion. Gauhar who is a former CEO KE, in his letter raised several questions on the Terms of Reference (ToRs) proposed by the management of Karachi Electric.

Gauhar, who earlier claimed he is keeping himself away from KE issues has now written a letter to PC just days after the visit of Abdulaziz Hamad Aljomaih to Islamabad, copies of which have also been sent to Finance Minister, Energy Minister, Planning Minister, Law Minister, Attorney General of Pakistan etc, in which, he opposed some of the under consideration proposals.

Gauhar’s critics accuse him of deliberately creating hurdles in approval of ToRs of Arbitration Agreement. However, he denies such accusations.

“Major progress in KE’s Arbitration Agreement is that the IMC has decided to present the case before the ECC,” the sources said, adding that Finance Minister, Dr Abdul Hafeez Shaikh, was not present in the meeting. However, a representative of Finance Ministry, Anwar Shiekh was present in the meeting.

The sources said consensus was evolved among the stakeholders due to which it was decided to place the case before the ECC, as financial implications are involved and ECC is the competent forum to discuss economic matters.

“The claims of all stakeholders, including risks, will be placed before the ECC comprehensively so that no stakeholder has any ambiguity or doubt in the process,” the sources maintained.

There was a consensus in the IMC that these issues should be looked into by the ECC, which is the appropriate forum to take an informed decision, the sources continued.

All the stakeholders, like, SSGC, Petroleum Division, Power Division, CPPA-G and Attorney General attended the meeting. Federal Ministers and two SAPMs were also present.

The sources said, a detailed discussion was held on the letter written by SAPM, Tabish Gauhar.

“The IMC also held a detailed discussion on the contents of Tabish Gauhar’s letter and his concerns. On the basis of his concerns, it was decided to present the case before the ECC due to financial implications and viewpoints of all the stakeholders,” the sources said.

All the implications and claims of stakeholders will be placed before the ECC, very soon as Minister for Privatisation has directed the Ministry to work on it expeditiously.

“The position of all the stakeholders can only be reconciled at the appropriate forum, which is the ECC,” the sources further added.

Gauhar in his letter stated that with reference to the compensation amount, if any, payable by MoF to KE for delayed payment of Tariff Differential Subsides - the Arbitrator needs to also account of the various actions and policy choices of KE over the last several years, for example, appealing, contesting, including in courts of law, against Nepra's Multi-Year Tariff (MYT) determinations that led to, among other things, delay in the crystallization of TDS claims with MoF ( i.e. the " casus & effect" principle), leading to delayed or non-payment of KE's dues to CPPA-G and the resultant build-up circular debt (whilst there was no corresponding relief to CPPA-G on its own payment obligations towards the IPPs under the PPAs).

Gauhar also reiterated his opposition to any proposed policy direction by the Power Division to Nepra to pass on the "cost of funds" in the tariff of honest regularly paying Disco consumers due to delayed payment of subsidy by the federal government for any reason.

The letter further noted that "although, the Nepra Act amendment (under consideration by the Parliament) would allow imposition of " any financial obligation of the federal government with respect to electric power services" to the consumers in the share of "surcharges" (subject to a cap), this "enabling" provision has to be applied extremely judiciously and sparingly in the future to avoid such future increases in tariff and the resultant adverse impact on power demand and commercial losses".

Tabish Gauhar further contended that unlike the IPPs that have a contractual arrangement with CPPA-G, the Discos (whilst regulated) do not and, in his opinion, this ought to remain a "working capital" and "cost of doing business" consideration for investors in the distribution space of Pakistan.

Gauhar could not be reached for his response to and comments on these developments.

Copyright Business Recorder, 2021

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