Regulatory authorities are set up to safeguard the larger national interest and ensure the availability of utility services to the people at reasonable price. But ironically in Pakistan National Electric Power Regulatory Authority (NEPRA) has assumed the role of guarantor of protecting the vested interest. In gross violation of Power Purchase agreement, the Authority has been applying the volatile rupee-dollar exchange rate as yard-stick for the purpose of payment on inflated tariff to Independent Power Producers, not only to the detriment of crisis ridden economy. By virtue of this fraudulent formula of tariff determination additional billions of rupees have been robbed from the consumers for illegal payments to the owners of thermal electricity generating firms. This highly unethical practice has been continued for the past several years, as revealed in an internal audit report.
It is pertinent to mention that because of strong political connection of two prominent IPP owners in PPP and PML-N no international audit was allowed to be conducted to evaluate the production cost of thermal power and benefits accrued to the power producers. Credit must be given to PTI government to have shown spine for compelling the IPPs mafia to allow internal audit of production cost and their profits. The audit report revealed that NEPRA has been using the measure of higher rupee-dollar exchange rate over the past several years in violation of power purchase agreements.
Senate Standing Committee on power had also raised the issue of fluid rupee-dollar parity index in the determination of tariff for IPPs. The committee had noted that profits of IPPs swelled to 40 percent against the 17 percent guaranteed rate of return on investment as reflected in the balance sheet. The issue of excessive payments to IPPs had come up for hearing in the Supreme Court in January.
In the PPP second tenure of government in 1993-96, power purchase agreements were made with IPPs the clauses of which were heavily loaded against the national interest, particularly the capacity charges clause, which binds the National Distribution and Transmission Company (NDTC) to make 40 percent payments as capacity charges. The payments made on account of idle capacity of thermal power plants are one of the major components of over 1.20 trillion rupees circular debt.
Differences between IPPs and NDTC developed in January 2011over the non-utilisation of full capacity of thermal power plants due to fuel shortages which the private power producers blamed on the power purchasing company. The dispute could not be resolved in the light of court decision and the matter went to London Court of International Arbitration (LCIA) which in its final award in 2017 asked the NDTC to make payment on account of capacity charges along with the mark up accrued thereon. Hence the Company lost a case regarding payment of Rs. 11 billion plus Rs. 3 billion markup to nine IPPs. What a wonderful gift of oligarchic democracy that the leadership of PPP had given to the poor people of Pakistan in the shape of power purchase agreements.
The NDTC approached London High Court against the LCIA award but the British Court passed an order for payment of litigation cost to IPPs worth Rs. 66.7 million although the writ petition had been hastily withdrawn within a week time. Hopefully, the incumbent government will give due priority to power sector crises and explore all options for getting a legal solution to do away with the one sided clauses later inserted in the Power Purchase Agreements with IPPs.
