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ISLAMABAD: Power Division (PD) is reportedly facing a catch-22 situation with respect to payment of 40 per cent first tranche of Rs 403 billion to the Independent Power Producers (IPPs) as National Accountability Bureau (NAB) has made it clear that execution of contracts does not fall within the purview of National Accountability Ordinance (NAO) 1999, a senior official told Business Recorder.

The government had pledged to pay Rs 85 billion, 40 per cent of agreed amount, to the IPPs established under the pre-1994 Power Policy and the 1994 Power Policy.

Power Division, sources said, had written a letter on March 18, 2021 to the anti-graft body to go through all the revised agreements and other available documents and issue a clean chit before the payment to the IPPs to avoid any investigation in future.

A meeting was held between the Negotiation Committee and Chairman NAB on February 18, 2021, so noted a press release issued by NAB. The officials of ISI who assisted Negotiation Committee in revising and finalising PPAs with IPPs, also attended the meeting.

The last day for making payment was March 29, 2021. GoP had pledged to pay within 30 business days from February 11, 2021 when the agreements were signed.

NAB had asked for provision of record and present status of MoU / agreement\ signed and final negotiations between IPPs and GoP under section 19 of National Accountability Ordinance 1999.

According to sources, in response to Power Division’s letter NAB has received the revised contract 2021 in terms of Section 33B of the National Accountability Ordinance (NAO), 1999. The anti graft body is silent on status of scrutiny of revised contracts but at the same time says that the law allows the government to proceed in accordance with the contracts.

“The concerned Ministry is fully authorized and competent in law to execute any contract/contracts as they desire, because the execution of contracts by any Ministry does not fall within the ambit and purview of Section 9 of the NAO but the jurisdictional domain of the Ministry concerned,” the sources quoted NAB as conveying to the Power Division.

The issue of payment to the IPPs has become very complicated for both the Finance Ministry and Power Division as NAB is not allowing implementation of the agreements or barring the government from meeting the commitment.

The sources said, Power Division has sought opinion of Law Ministry and Finance Ministry on the NAB’s letter and will table the issue before the Economic Coordination Committee (ECC) of the cabinet and then Cabinet.

When contacted, SAPM on Power and Petroleum, Tabish Gauhar confirmed that NAB has sent its response on the letter written by the Power Division on March 18, 2021.

“Now we’ll submit a summary to the ECC along with the NAB’s letter and comments of Law Division and Finance Division for an informed decision,” he added.

Gauhar was of the view that the Power Division is ready to pay the amount as per the agreements “but no one wants to earn disrespect”. He further stated that the government understands that any delay in payment will further swell the circular debt.

On March 29, 2021 Power Division in an official statement said “we were supposed to pay Rs. 85 billion to Hubco, KAPCO, and the 1994 Policy IPPs on March 29, 2021, however, due to NAB's notice, the process is currently under hold. As per our agreement with these IPPs, we have 70 additional days to make this payment before the agreement is terminated which we don't think would happen,” Power Division stated.

Power Division believes that any step taken in haste can create troubles for the concerned officials in future that is why all possible legal procedures are being completed.

However, IPPs are of the view that as the government has already “defaulted” on payment as per the contract i.e. 30 days, who will now pay the interest to be accrued on the credits raised from banks.

IPPs established under the Generation Policy 2002 argue that if the agreed 40 per cent amount is not paid, they will not be able to ensure fuel stocks.

Nepra has not yet approved amendments in the PPAs as per the agreements which are necessary to clear payments of IPPs established under the Power Generation Policy 2002.

NAB has stated that the Bureau is conducting investigation on the allegations of corruption and corrupt practices against owners /management of Nishat Chunian Power Limited (one of the Power Policy 2002 IPPs), officers/officials of Nepra and officers/officials of CPPA-G and others.

Power Division argues that since NAB is conducting investigations into the issue of excess profitability and this matter relates to IPPs of the Power Policy 2002, it would be appropriate to wait for the conclusion of NAB investigations before proceeding with payments to these IPPs. NAB maintains that the matter has been converted from an Inquiry in 2019 to Investigation in 2021, which has to be presented before the accountability court.

NAB has clarified multiple times that there was no wrongdoing in the revision of contracts by a high level negotiation committee notified by the Prime Minister.

NAB has also stated that Ministry of Energy is the competent authority in these matters. In fact, the committee successfully revised the tariffs downward by negotiating with IPPs which were sovereign-guaranteed contracts.

The discounts agreed by IPPs are only to be given when first payment of 40% is paid and therefore at present the government is losing on the “huge unprecedented discounts” given up by IPPs in the “national interest”.

All the amounts to be paid to IPPs are long overdue and relate to periods before the signing of these agreements; the invoices for these amounts have gone through multiple approval processes, which also include Nepra and CPPA-G.

Copyright Business Recorder, 2021

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