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PC shows willingness to share power SPA

ISLAMABAD: Privatisation Commission (PC) on Wednesday expressed its willingness to share the Share Purchase ...
Published July 29, 2021
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ISLAMABAD: The Privatisation Commission (PC) on Wednesday expressed its willingness to share the Share Purchase Agreement (SPA) between the Government of Pakistan and KES Power, Hasan Associates (Pvt.) and Premier Mercantile Services (Pvt.) Limited, on the condition that it should not be made public as per the confidentiality clause.

This assurance was given by senior Legal Consultant for the PC, Mohsin Abbas Syed to Senate Standing Committee on Power, which met under the chairmanship of Senator Saifullah Abro.

"We are ready to present SPA to the Senate Committee for sharing with its members but not to be made public ... to media as we have given commitment of confidentially of pact to the buyers. We do not wish to expose ourselves to or give an opportunity to the other party to take us to the arbitration court in violation of agreement and seek damages," he added.

PC's Legal Advisor argued that there should be no confidentiality clause in sale agreement of any public sector entity but since this clause is part of SPA the government has to honour it. He said that Information Commission has sought a copy of SPA but PC took the same plea, i.e., when a commitment is made, it should be honoured. He said Senate Standing Committee can seek the copies of any agreement under rule 188.

After hearing PC's senior Legal Advisor, Chairman Standing Committee directed Secretary to the Standing Committee to seek the copy of SPA from the PC under rule 188 adding that the Committee will then decide whether to share it with the public or not.

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Chairman Standing Committee, however, was unhappy at the absence of Chief Executive Officer (CEO), KE, from the meeting.

Power Division shared the Implementation Agreement between GoP and KESC (now KE) shared with the Committee, in addition to template of Power Purchase Agreements (PPAs) with the IPPs of pre 1994, 1994, 2002, 2006 and 2015.

Secretary Power Division Ali Raza Bhutta, defended supply of electricity to KE at par with other Discos, saying that subsidy is meant for consumers and not the power utility. He said, KE's own generation is about 2000MW while its demand is 3200-3300MW.

He said the government has "privatised KE not the people of Karachi" who are getting subsidy at par with the consumers of other Discos. He also explained the reasons for an increase in circular debt of KE to Rs 83 billion in FY 2020-21 from Rs 72 billion in 2019-20.

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Chairman Standing Committee raised serious objections on the members of Discos' Board, saying some members have been given representation on multiple Boards. He also questioned the criteria of Board members' appointment.

The official also raised concern on the appointment of 72-year-old Chairman Sepco Board, claiming that "an ambulance receives him at Sukkur airport when he arrives for the Board meeting".

The Standing Committee directed Power Division to share details of Discos' Board members along with their CVs as some of the members and Chairmen either worked under SAPM on Power and Petroleum or were hired by him in KE.

The Standing Committee was informed that circular debt stood at Rs 2.280 trillion during FY 2020-21 as only Rs 130 billion was added to it due to better management by the Power Division.

Secretary Power highlighted the factors which contribute to the circular debt, including unpaid subsidies, unbudgeted subsidies, PHL mark-up, pending generation cost, non-payment by KE, Discos losses/ inefficiencies, Discos under recoveries, PHL principal payments and stock payments. He said, line losses and theft accounted for 50 per cent of total circular debt.

He said the Power Division sought Tariff Differential Subsidy (TDS) of Rs501 billion for 2021-22 but the Finance Division allocated Rs 330 billion. This amount has to be parked in circular debt. Nepra has allowed average losses of 15 per cent to Discos but losses remained at 17.4 per cent. In Sepco, Hesco, Pesco and Qesco losses are over 30 per cent. He said that the annual loss of Rs 67 billion is due to inefficiency and lack of investment in the system.

Secretary Power said that 89 per cent domestic consumers using 1-300 units monthly get some subsidy.

He maintained that there are faults in the tariff structure which are being rectified through revised subsidy policy recently approved by the government. He said Parliament has also approved amendments to the Nepra Act, which is pending with the President for approval, adding that as a notification is issued, Nepra will have to notify adjustment in tariffs automatically until the federal government files a request.

The committee members from Balochistan expressed annoyance at long hours of load shedding and "non-supply" of electricity to Gwadar.

The Secretary Power and CEO Qesco informed the committee that Iran is not supplying 100MW electricity as per the agreement as it is also facing loadshedding these days.

The issue of recruitment on 12000 vacant positions in Peshawar Electric Supply Company (Pesco) also came under discussion, as did scrapping of previous recruitment process of line superintendents.

The committee members asked why no action has been taken against Pesco officials who are responsible for hiring testing firm that conducted faulty testing process. Secretary Power directed CEO Pesco to conduct an inquiry and take action against officials who hired the services of the testing agency.

According to an official statement, the meeting commenced with an overview of all policies related to guidelines for setting up of IPPs. The Secretary Power Division provided the Committees with details regarding policies formulated in 2002, 2006 and 2015. He informed the Committee that a subsidy reform proposal has been approved by the Cabinet and added that this will ensure the equitable distribution of power. It was asserted that line losses and non-recovery are among the main reasons for increase in circular debt. In a similar context, members inquired about electricity units that are provided free to DISCOs employees. It was also stressed that the reason for line losses is the use of archaic distribution lines and machinery. The Committee asserted that urban and rural territories must be divided to ensure ease of recoveries.

Discussing the Power Purchase Agreement between National Transmission and Dispatch Company (NTDC) and K-Electric the Committee directed that details must be provided to the Committee under Rule 181 of the Rules of Business and Conduct.

While discussing the performance of QESCO, Committee members stressed the need for provision to areas of Jaffarabad, Nasirabad and Gwadar. Member of the Chamber of Commerce Gwadar, who was present in the meeting, shared the plight of Gwadar and the way electricity shortfall and outages were shutting down businesses in Gwadar. He said that fish export facility in Gwadar has shut down due to the closure of 60 ice factories as a result of recurrent power outages in the city. Chairman Committee, Senator Saifullah Abro directed that CEO QESCO must visit Gwadar at the earliest to address the issues and find alternate solutions.

Taking up the issue of process of appointments in PESCO, the Committee stressed that the report of the sub-Committee constituted earlier on the issue must be submitted to the Committee along with details of the new criterion for hiring and a copy of the advertisement placed in newspapers.

The meeting was attended by Senator Fida Muhammad, Senator Syed Shibli Faraz, Senator Saifullah Sarwar Khan Niazi, Senator Zeeshan Khanzada, Senator Prince Ahmed Umer Ahmedzai, Senator Sana Jamali, Senator Haji Hidayatullah Khan, Senator Bahram and Khan Tangi, Senator Hafiz Abdul Karim, Senator Asad Ali Khan Junejo, Senator Ahmed Khan and senior officers from the Power Division, along with other relevant officials.

Copyright Business Recorder, 2021


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