Seeing the bigger picture

Investigations and compliance issues are complex legal matters that require knowledgeable representation. The interior ministry has placed the names of 14 owners and CEOs of rental power plants on the Exit Control List (ECL) on the request of the National Accountability Bureau (NAB). The NAB has invoked National Accountability Ordinance (NAO) against four RPPs, asking them to refund down payments with mark-up.
The NAB had moved because the Supreme Court had earlier declared the RPP contracts void ab initio only after it was satisfied through protracted hearing of the rental power scam case that there is sufficient evidence to warrant an investigation. Placing of travel and financial curbs on these well-known individuals, however, does not necessarily mean that any one of them is guilty of fiduciary malfeasance.
Most people are wondering whether good people get tarred with the same brush as bad people. Former Finance Minister Shaukat Tarin's name among the 14 individuals placed on the ECL is a case in point. Generally recognised as the one who blew the whistle on RPPs by forcing a third-party audit of the rental scheme by the Asian Development Bank, Tarin in effect had blocked the continuation of this scheme which was all ill-planned and devoid of any economic benefit to the country.
Rental Power was conceived by the Musharraf/Shaukat Aziz government as a quick fix to bridge a widening gap between demand and production for a limited period, i.e., before the six new Independent Power Producers (IPPs) came into production. With a guaranteed gas supply to RPPs, the process was profoundly flawed from day one. The first mistake was to give approval without solicitation - in violation of PPRA rules - to two plants when only one was supposed to be approved. Alarm bells should have rung when the Roche Power Plant (an operating IPP) was shut down to divert natural gas to an RPP being inaugurated by the then President, Pervez Musharraf.
This episode makes it quite apparent that the Ministry of Petroleum and Natural Resources' estimates of Natural gas production were grossly defective. This is substantiated by the government's failure to provide the guaranteed quantity of gas to the fertiliser giant, Engro.
President Zardari, like his predecessor, firmly believed that the RPPs were a quick fix solution needed to meet the growing demand. He often cited that the IPPs, which were installed under the previous PPP rule, too faced similar opposition. Had these IPPs not been there the country's power crisis would have become more acute.
He was of the opinion that the opposition to RPPs was stemming from quarters which were wrong before and are erroneous again. The thrust of the policy was in making power available at any price instead of making it available at an affordable price as the strategy was based on English saying "desperate times call for desperate measures." Study of the energy mix for electricity supply showed a fast falling share of hydel power and a meteoric rise in thermal power, i.e., power generation through oil and gas. Other sources such as: Coal, nuclear, solar and wind that needed to be inducted so that power can be switched from source to source depending on the price of input were conspicuous by their absence.
The Prime Minister's advisory task force on energy chaired by Farooq Rehmatullah recommended the setting up of an energy board with responsibility under one roof to meet the challenge. The creation of a Ministry of Energy by combining Ministries of Water and Power and Petroleum and Natural Resources was needed but was not considered desirable under the present political dispensation.
After the 2008 general elections, the push for more RPPs came from the Ministry of Water and Power under Raja Pervez Ashraf. The Petroleum and Natural Resources ministry with Dr Asim Husain at the helm pushed for addressing the circular debt so that refineries, oil marketing companies, gas distribution companies and the exploration and production organisations could operate at optimum capacity. This obviously involved the intervention of the Ministry of Finance which at that point in time was under the stewardship of Shaukat Tarin with Salman Siddique as finance secretary.
Pakistan's forex reserves were dwindling and the country was seeking help from the International Monetary Fund. The country risk was high and banks were charging about four percent as confirmation charges for Letters of Credit. Bids had been solicited by the government for supply of power from RPPs for three years against a seven percent advance and a standby letter of credit (SLB) for the balance 93 percent for rent over the three year period. To minimise the cost of confirmation charges for the SLB, Tarin, the quintessential banker asked the Ministry of Water and Power to renegotiate the payment terms.
Instead of paying 4 percent every year to banks as SLB confirmation charges, the government opted to provide 14 percent adjustable advance against a bank guarantee (issued by the AAA rated bank) from the RPPs. Thus negotiations with RPPs were finalised increasing the tenure from three to five years with no withholding tax in the first year and 14 percent advance rent against a bank guarantee. The operational Ministry for RPPs was Water and Power and not Finance.
It is now for the NAB to get to the truth by conducting specialised systemic investigations on dubious rental power deals within tight timeframes in a fair and unbiased manner. Not only will such an approach contribute towards restoring anti-graft body's image, it will show, clearly and unambiguously, that the government harbours no hostility towards Supreme Court.