EDITORIAL: After several rounds of negotiations, the federal government has come up with an agreement with around 50 Independent Power Producers (IPPs); these IPPs came into existence under the pre-1994, 1994, 2002 and 2006 policies. The agreement was signed on 12th February with 32 IPPs (apart from some wind IPPs of the 2006 policy) and the first tranche payment release was planned before March end – within 30 working days after the signing of the contract. According to the agreement, 40 percent payment will be made through first tranche. Everyone expected that the first tranche will be released soon after the signing of the contract. But the government defaulted on its payment. Now if the payment is not made within 70 calendar days after the default, the contract would automatically quash. Later this week, Economic Coordination Committee (ECC) of the cabinet finally approved the first tranche, and the payment is expected after the ratification from cabinet (after Eid holidays), provided there are no more twists in the story. The real twist in the IPP payment saga came when National Accountability Bureau (NAB) wrote a letter to Power Division, raising questions on the settlement reached with Nishat Power (a 2002 policy IPP) as a NAB inquiry is ongoing against the company. In the same letter, NAB sought information about all the IPPs that had signed the contract. The required information was provided to the NAB. But then Power Division got cold feet. They were waiting for clearance by NAB before making payment. Although NAB did not raise any objection, the Power Division kept on waiting for a clean chit by NAB. Back-and-forth communication continued and the matter got stuck.
Thereafter, the ECC (prior to Shaukat Tarin’s joining) attempted to clear the payment issue one more time. Later, Shaukat Tarin became finance minister and in his first ECC meeting he deferred the decision for another week on some plausible grounds. There was a proposal to form a committee to settle payments to IPPs with the finance minister and Special Assistant to Prime Minister (SAPM) on power and petroleum Tabish Gauhar as members. Subsequently, the cabinet ratified the committee’s formation. Then the confusion surfaced. After the cabinet meeting, the PM’s office issued a press release and information minister Fawad Chaudhary announced that payments to IPPs stood approved. However, Power Division denied and later the PM’s office changed the contents of the press release. The very next day, ECC cleared the first tranche to 20 IPPs amounting to Rs 90 billion. However, the case of the 2002 policy IPPs is still not clear. The NAB clearance is warranted. The real issue is of four IPPs – Nishat Power, Nishat Chunian, Liberty Power and Attock Power – and their due payment is greater relative to the others’. There are inquiries going on in NAB. The settlement with the government was based on arbitration by three independent judges. Twelve IPPs of the 2002 policy signed the decision of arbitration, but the government has yet to sign it. The word in the power corridors is that eight non-controversial IPPs out of these 12 may get clearance before the expiry of the contract (in case of non-payment) in June. NAB does not have any issue with these IPPs. For the remainder four, it seems the government may seek clearance from NAB. It is not easy as it must go to NAB board for approval. There, it is quite likely that the matter will again attract, albeit unnecessarily, the allegations of excess returns. The government, therefore, is required to demonstrate political will by doing and saying things that produce a desired outcome: resolution of payment issue without any further loss of time.
Copyright Business Recorder, 2021
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