Award of Kohala hydropower project contract: Pakistan likely to suffer Rs 577 billion loss in 30 years: TI Pakistan

The award of 1100 MW Kohala hydropower project contract to China International Water and Electric Corporation (CWE) of China, being considered as controversial by Transparency International Pakistan, may result in an estimated loss of Rs 577 billion in 30 years.
Transparency International Pakistan Adviser Syed Adil Gilani, in a letter sent to Finance Minister Dr Abdul Hafeez Shaikh on January 30 has reminded him of Transparency International Pakistan letter of November 10, 2011 "on the manipulation of rules and law to award the contract on BOT basis by AJK government."
It was claimed that Kohala was AJK government project, whereas, "it has been proved that Ministry of Water & Power (MOW&P) was wrong. "In the United Nations documents, the 1100 MW Kohala hydropower project has been declared as a project of Government of Pakistan, the Transparency International Pakistan letter said.
The Minister, as Chairman of ECC, has been requested by Transparency International Pakistan to stop MOW&P from destroying the fabric of governance and circumventing Public Procurement Regulatory Authority (PPRA) Ordinance 2002 and Public Procurement Rules 2004 "to proceed with an illegal act of awarding US $2.2 billion 1100 MW Kohala hydropower project contract to CWE, China, without inviting public tenders".
"We had already informed you to substantiate that this project is a Government of Pakistan project in our previous letter, and that Wapda has already spent Government of Pakistan funds of Rs 545 million on this project by paying a major portion to a Consortium of SMES International Australia as a Lead Firm, Sogreah, France., Scot Wilson, UK, Mirza Associates Engineering Services, Pakistan, Engineering General Consultant for the feasibility study contract, as well as Design and Tender Documentations, which was completed in November 2009," Gilani said. He pointed out that MOW&P has been denying the fact and misguiding by stating that this is an Azad Kashmir project, and, therefore, PPRA Ordinance 2002 and Public Procurement Rules 2004 are not applicable.
In order to prove that 1100 MW Kohala hydropower project is a Government of Pakistan project, Transparency International Pakistan has referred to reports published on January 28, 2012, which confirm that 1100 MW Kohala hydropower Project has been registered with the United Nations Framework Convention of Climate Change and that SMES International Australia as a Lead Firm, Sogreah, France, Scot Wilson, UK, Mirza Associates Engineering Services, Pakistan, Engineering General Consultant, have been registered with UNFCCC as feasibility and design consultant of 1100 MW Kohala hydropower project.
The nation has already suffered due to delay of hydro projects for one reason or other, viz IPP, and most recently RPP, and now, to cap it all, "irregular processing of 1100 MW Kohala hydropower project and 7,000 MW Bunji Dam in Astore district of the Northern Areas of Pakistan," the Transparency International Pakistan said.
Since it has now been proved from the United Nations documents that 1100 MW Kohala hydropower project is a project of Government of Pakistan, the Ministry of Finance may take action to order Ministry of Water & Power to invite tenders for this project on BOT basis. Gilani has pointed out in his letter that according to UN documents Kohala hydropower project was and is a Wapda project, like Neelam Jhelum hydroelectric project I, and comes under the ambit of PPRA Ordinance 2002 and Public Procurement Rules 2004 on the following grounds.
1) That this project has been processed by Wapda and PPIB, and more than Rs 546 has-been reportedly spent by Wapda & PPIB from federal funds of GoP.
2) 2) That the project is being set up for providing electricity to Pakistan by Wapda/PPIB in Kashmir and, therefore, it comes under the ambit of PPRA Ordinance 2002 and Public Procurement Rules 2004.
3) Without tendering, this contract may cause a loss of Rs 577 billion, in 30 years.
4) That sovereign guarantee to the Chinese company for buying electricity is being provided by the Government of Pakistan, which may be in trillions of rupees.
5) Why CWE approached UNFCCC and is claiming carbon credit under the Clean Development Mechanism, which is an effort to gain illegal benefits, when MOW&P has already stated that CWE will bring 100 percent private investment, and no GoP funds are involved?
6) CWE, by approaching UNFCCC and claiming carbon credit under the Clean Development Mechanism, has jeopardised Pakistan's claim already submitted by Wapda in the UNFCCC for the same project.
7) On what basis will the tariff be approved after the project has been awarded to CWE by the Government of AJK?
8) How could the Government of Pakistan be signatory of the concession documents with CWE, when the project is being awarded by AJK Government?
ADB in its report of 2007 'Support of Infrastructure Investment' has also stated that Nepra Act not being applicable to AJK where significant hydel sites are located that prevents direct tariff rights being acquired by the project; uncertainty over the question whether the AJK Government or the AJK Council would be the signatory to the concession agreement and uncertainty over sovereign guarantee for IPPs located in AJK; and unpredictability of tariffs in the absence of any precedent hydel tariff determination by Nepra.
Moreover, Transparency International Pakistan said, CWE is also facing allegation of evasion of Government of Sindh stamp duty to the tune of Rs 60,1152,000, claimed by Director (E&I) Board of Revenue, Sindh, Hyderabad.
"When a parliamentarian is disqualified for non-payment of electricity, gas or telephone bills, or bank loan, how could a contractor with Rs 60 million stamp duty tax evasion for last two years be qualified for $2.2 billion BOT project?" Gilani asked.
Concluding, Transparency International Pakistan has requested the Finance Minister to act according to rules and save the nation from multibillion dollars loss. "This is to remind that favouring a firm against the rules amounts to corruption and corrupt practices under NAB Ordinance 9 (vi) if he misuses his authority so as to gain any benefit or favour for himself or any other person, or renders or attempts to render or wilfully fails to exercise his authority to prevent the grant, or rendition of any undue benefit or favour which he could have prevented by exercising his authority."
"Transparency International Pakistan is striving for across the board application of rule of law, which is the only way to stop corruption," Gilani said. Copies of the letter have been forwarded to the following for necessary action as per rules, read with Supreme Court of Pakistan's order dated April 28, 2010 for action under the rule of law to save billions of dollars corruption, the Transparency International Pakistan said:
Chairman, Public Accounts Committee, Islamabad, Chairman, NAB, Islamabad, Auditor General Pakistan, Islamabad, Chairman, Wapda, Lahore, Managing Director, PPIB, Islamabad, Registrar, Supreme Court of Pakistan, Islamabad, Secretary, Ministry of Water & Power, Islamabad, and Managing Director, PPRA, Islamabad.