Supreme Court decision against RPP

The three-member bench, headed by Chief Justice Iftikhar Mohammad Chaudhry, ordered Walters Power International (WPI), in which former Oklahoma Governor David Walters is a major shareholder, and its Pakistani associate company Associated Group, led by Iqbal Z Ahmed, to submit a written statement that the 11.28 million dollars – the 14 percent advance on the rental power project in Naudero and Guddu, allowed by the Ministry of Water and Power as opposed to the more usual 7 percent – as well as accrued interest on that advance would be returned to the government.

There are reports that the WPI has returned 300 million rupees to the government in an effort to avert any adverse action by the court and the remaining balance/advance paid has also been paid subsequently. What must be a source of immense relief to the general public is the statement of the Chief Justice that “people will get tired of taking bribes, but the court will not be tired of taking suo motu notice on such matters.”The controversy surrounding the RPPs is further deepened by the court verdict. The public-friendly outcome of the positive and unprecedented role played by the former Finance Minister Shaukat Tarin in convincing his visibly reluctant cabinet colleagues to submit the RPPs to a third party audit appears to have been entirely neutralised.The decision of the Federal Minister for Water and Power to increase the 7 percent advance to 14 percent, without retendering, as required under the public procurement rules and regulations would have no impact on the country’s fortunes with respect to one RPP at least, courtesy the court and not the government. The fact that the case of alleged corruption in the RPPs is pending before the court must provide a further comfort level to the people of this country, overburdened by the ever-rising utility rates that are only partly due to the supply shortage attributed to the flawed policies of the Musharraf era.

In this context it is appropriate to once again revisit the six major disturbing findings of the third party audit: (i) the RPP agreements were made in haste without examination of fiscal and contractual obligations; (ii) the agreements were clearly in favour of the sellers, for example if a contractor absconds after the agreement, the government would be forced to pay capacity charges and project efficiency committed by the RPP sponsors was for 32-35 percent, but the government would be legally bound to make payments for 90 percent capacity utilisation, (iii) the contracts lack sound clauses in case of non-performance by the RPPs, (iv) eight RPPs would entail increase in power tariff by 24 percent, which is in addition to about a 30 percent increase in electricity rates already committed by the government with multilateral lenders under the International Monetary Fund programme, (v) the existing logistic infrastructure does not match transportation requirements of the additional fuel oil needed for the new RPPs.Although the RPPs were estimated to increase furnace oil consumption by more than 30 percent, when compared with the country’s existing fuel oil consumption, no supply arrangements have been put in place with Pakistan Railways or other relevant agencies; and (vi) the cost of the RPPs would be 5 billion dollars in foreign exchange, which would lead to greater reliance on foreign loans.

The report’s recommendations were to: (i) pursue planned independent power projects (IPPs) instead of RPPs, which would allow the electricity shortfall to be overcome in 18 to 24 months with a lower tariff as the RPPs’ tariff is generally 3-5 cents higher than the IPPs’ tariff; and (ii) the government should take in hand only eight RPPs with a total generation capacity of about 1200MW as these 8 had reached an advanced stage of agreement.The Cabinet approved the recommendations of the third party audit, however, the Supreme Court verdict and later reports reveal that the focus on the RPP as opposed to the IPPs, has continued. It is unfortunate that relief to the general public is being provided by the courts and not the people’s representatives, be they from the ruling party or members of the opposition.The Supreme Court verdict once again brings serious allegations of corruption and across-the-board kickbacks to the forefront. The government’s insistence that its decision to target Transparency International Pakistan, in response to its poor rating in the corruption perception index, if correct, would find few supporters now.What is inexplicable is that the government continues to not only ignore serious allegations of fraud, but also actively compromises court-directed investigations into scams that are estimated at billions of dollars, or in excess of what it seeks from the Friends of Democratic Pakistan as a democracy dividend or as compensation for fighting the war on terror – Brecorder