ISLAMABAD: The Ministry of Finance has sought progress report from the Power Division on amendments to mediation agreement pertaining to claims of K-Electric for Tariff Differential Subsidy (TDS) and Karachi Water and Sewerage Corporation and payables of KE to different SOEs such as CPPA-G/ NTDC and SSGC, official sources told Business Recorder.
The Power Division briefed the forum that in order to resolve subject issues/disputes related to K- Electric, the then Prime Minister of Pakistan constituted a Task Force on June 10, 2022.
The recommendations of the Taskforce with respect to multiple agreements (Power Purchase Agency Agreement, Inter Connection Agreement, Tariff Differential Subsidy Agreement and Mediation Agreement) were approved by the Federal Government on December 16, 2023 and accordingly a Mediation Agreement was executed. Clause 2 of the Mediation Agreement specified the below mentioned claims for mediation: (i) what is the amount of outstanding receivables of KE from KWSC? (ii) What is the amount of Tariff Differential Subsidy owed by GOP to KE, including but not limited to any claims accrued to KE in respect of Tariff Differential Subsidy, but pending due to any procedural delays? (iii) What is the amount payable by KE to NTDC/CPPA? (iii) What is the amount Payable by KE to SSGC? And (v) whether any other payments are due to the parties with respect to the claims mentioned above?
Pending TDS: KE seeks payment of Rs137.4bn from Centre
The Power Division further briefed the forum that clause 3(d) of the Mediation Agreement specified timelines for the mediation as follows: “The Mediator shall render his determination in writing in relation to all Claims submitted before him within sixty (60) days from the date of appointment as Mediator, extendable by a further thirty (30) days if mutually agreed upon by all Parties”.
The Power Division apprised the forum that the mediation process commenced by the appointed Mediator Ashtar Ausaf Ali on 04-3-2024 but KWSC refused to participate in the mediation process in a letter of January 13, 2024 and did not join the proceedings despite efforts of the Mediator.
KE brought claims regarding: (i) amounts allegedly owed by KWSC to it, against GOP in absence of KWSC; and (ii) certain purportedly verified and unverified claims of tariff differential subsidy pending before GoP.
The position of GoP (Finance Division) to the extent of purportedly verified TDS claims was noted. NTDC/CPPA-G filed a statement of claim for amounts owed by KE against supply of electric power by NTDC/CPPA-G. The SSGC also filed a statement of claim regarding amounts owed by KE to it.
Moreover, KE had also claimed certain amounts on account of its claims in the nature of write off, End of Term Adjustment, New MYT 2024 to 2030 and other pending claims, which were yet to be determined by Nepra as prudent and part of its tariff and thereafter in respect of which the federal government was yet to take a policy decision for allocation of subsidy Tariff and Subsidy claim.
A chronology of the key events in the mediation proceedings which showed that the participating parties took multiple steps in the proceedings and owing to the complexity of the issues, the mediation proceedings could not be completed within the envisaged timeline.
Further, KWSC refused to participate in the mediation process; moreover, the issues in respect of Additional Tariff and Subsidy Claim, particularly in the context of determination of whether such claims are prudent or otherwise fell within the exclusive domain of the regulator (Nepra) under section 7 read with 31 of the Regulation of Generation, Transmission and Distribution of Electric Power Act, 1997. Once so quantified and determined by Nepra, the tariff so determined shall be notified by the Federal Government keeping in view its fiscal targets and budgetary constraints and allocations. Therefore, the amounts claimed, and their adjustment(?) were beyond the scope of clause 2 of the Mediation Agreement, and any such exercise would also be an encroachment on the legal and regulatory domain of Nepra and dispensation of duties by the Federal Government under the Constitution of Islamic Republic of Pakistan, 1973.
The Power Division had submitted following proposal for consideration of the ECC: “Amendment of the Mediation Agreement to provide for a further period of sixty days from the date of approval for concluding the mediation process only in respect of claims specified in paragraph no. 04 above being within the scope of clause 2 of the Mediation Agreement”.
During the ensuing discussion, the forum was informed that the instant case was also discussed at SIFC where it was decided to request the ECC to extend the agreement by 90 days, instead of 60 days, for a smooth conclusion.
After detailed discussed the ECC approved the proposal “amendment of Mediation Agreement dated 16-02-2024 pertaining to claims of KE for Tariff Differential Subsidy and KWSC and Payables of KE to different State-Owned Enterprises (CPPA/NTDC and SSGC)” and approved the proposal of Power Division to amend the Mediation Agreement to provide for a further period of 90 days from the date of approval for concluding the mediation process only in respect of claims specified in paragraph No. 04 of the summary being within the scope of clause 2 of the Mediation Agreement.
The Finance Ministry, in its communication stated that the implementation report in respect of the ECC decision is still awaited and needs to be shared on the prescribed proforma.
Copyright Business Recorder, 2025
Comments