Senate’s recommendations on ‘illegitimate’ payments to IPPs: PD asked to share implementation status

ISLAMABAD: The Power Division has reportedly been asked to share implementation status of Senate’s recommendations on illegitimate payments of Rs 480 billion made to the IPPs in 2013 to clear circular debt of power sector by the then Finance Minister Ishaq Dar in one go, sources close to Chairman Standing Committee on Power told Business Recorder.

Chairman Standing Committee on Power, Senator Mohsin Aziz, who represents PTI in Senate, has sought implementation status of Senate’s recommendation in a letter to the newly-appointed Secretary Power Division, Dr Fakhar Alam Irfan.

Senator Aziz has also shared audit paras of special audit report on IPPs, which declared a portion of payments of Rs 480 billion as unlawful.

Senate body calls for forensic audit of IPPs

“I presided as the convener of the sub-committee on the Senate Standing Committee on Finance, Revenue, and Economic Affairs on this subject.

A comprehensive report was presented to the Senate Standing Committee on Finance on April 28, 2017, and was subsequently adopted by the Senate of Pakistan,“ he said, adding that the report outlines critical recommendations aimed at addressing the challenges associated with the circular debt in the power sector.

It is imperative that these recommendations be implemented in both letter and spirit to ensure effective resolution of the issues identified.

The sub committee had expressed its serious reservations that the M/o Water and Power had been changing stance on payment of idle capacity to the IPPs as in one of the meetings it stated that the IPPs had the capacity of producing more electricity than demand which could not be lifted due to weak installed system, however, now it had a different version notably that the IPPs had the capacity of producing electricity but could not do so due to non-payment of power dues by the government.

The sub-committee had the considered opinion that during June, 2011 to June, 2013, the country was facing acute shortage of energy, therefore, the payment in respect of forced outages and idle capacity to IPPs were totally inadmissible, illegal and unlawful and there was no justification for such payments.

After due deliberation, the Sub-Committee made the following recommendations/directions:

(i) the non-adjustment of liquidated damages against the claims of IPPs amounting to Rs.22.914 billion was an unlawful act by M/o Water and Power and recommended that the such payment should had been adjusted instead of setting aside prior to clearing the circular debt;

(ii) the payments made for idle capacity of power plants and forced/partial outages amounting to Rs.32.451 billion and Rs.147.921 million respectively was totally inadmissible, unjustified and unlawful, therefore, it strongly recommended that appropriate action must be taken against those responsible and the amount paid as such be recovered from the recipients;

(iii) the non-cash settlement of circular debt amounting to Rs.25.104 billion was illegal, therefore, it recommended that the appropriate action should be taken against the CFO, PEPCO for non- provision of all the relevant invoices to audit as well as to the Sub-Committee;

(iv) the Sub-Committee observed that the maintenance of an inventory and backup fuel was the responsibility of the IPPs and declared payment amounting to Rs.2.711 billion to IPPS on account of capacity payment as illegal and recommended a full-fledged probe so that the responsible persons could be held accountable including the recovery be made from the receivers;

(v) the reimbursement of withholding tax amounting to Rs.264.655 million to IPPs, ie, Attock Gen. Ltd, Atlas Power Ltd, Nishat Power Ltd. and Nishat Chunian Power Ltd. by the CPPA was irregular and directed the Federal Board of Revenue (FBR) to recover said amount from the IPPs;

(vi) with regard to payment on account of Open Cycle Cost (OCC) amounting to Rs.263.963 million, the Sub-Committee observed that the said amount was not covered under the Power Purchase Agreement (PPA), and that there was no ownership to the extent of its authorizing therefore that was grossly unjustified and the recommendation was that action should be taken against the authority which authorized the said payment;

(vii) NTDC made the payment of Rs.84.950 million contrary to the decision of the ECC on May 29, 1999, with regard to indexation of tariff and recommended that necessary action should be taken against the persons involved in the calculation of the said payment;

(viii) the committee vigorously recommended that since there existed a serious negligence and that inadmissible payments were made without any validation, which are of totally illegal nature, and must be probed in detail by FIA/NAB and responsibility be fixed for these payments on the individual/Ministry and its officials;

(ix) the committee also strongly recommended that recovery be made from all recipients, ie, IPPS, who have received these over and unjustified payments.

The Senate Committee is expected to take up the issue of payments of Rs 480 billion to IPPs in 2013 in its forthcoming meeting, to be held on September 20, 2024.

Copyright Business Recorder, 2024