Managing Director of Central Power Purchase Agency (CPPA) tendered his resignation before the Eid holidays, thereby making him the third casualty of the Minister for Petroleum and Natural Resources Shahid Khaqan Abbasi-led LNG import plan inclusive of imports from Qatar, transport, sale and financing of the commodity.
Although, the minister in his appearance before the parliamentary sub-committee, did indicate that the price of LNG would be below 7 dollars and once the agreement is signed full details would be revealed, three major concerns have been voiced about the LNG strategy by individuals fully cognizant of the sector as well as by the government of Sindh. First and foremost, the minister has refused to reveal details of the ongoing discussions with Qatargas by maintaining that he would do so as and when it becomes a fait accompli. Therefore, this statement that is not only a serious source of concern but is also inexplicable given the fact that he is negotiating a commercial deal for medium to long-term duration and once signed it will bind the country for some years to come well beyond the tenure of the current government. To dismiss criticism as the work of interest groups and implying that there are threats to his life cuts no ice mainly because of senior respected officials resigning in protest and citing legally valid reasons for doing so in writing. Secondly, the Sindh government has called for a Council of Common Interest (CCI) meeting to legitimately discuss why the federal government feels it has the right constitutionally to inject more expensive LNG into the SSGCL, which has access to cheap Sindh gas, which would then be diverted to Punjab. Once again the government has not called a CCI meeting to discuss this and instead argues that since LNG is a fuel the federal government is empowered to decide on the matter. Thirdly, the Sui Northern Gas Pipelines Limited (SNGPL) MD had his contract terminated because he reportedly expressed concerns over the entity's liabilities even if LNG importers fail to supply it for whatever reason. His successor has also expressed similar concerns over the matter in writing. In his inimitable style Abbasi shifted responsibility and parked all liabilities that were previously with SNGPL onto CPPA and NTDC; hence the latest resignation.
Clearly, Abbasi is not going to back down and one would hope that the Prime Minister is informed of these matters by an independent panel of experts. Unfortunately, though there appears to be no one of integrity who is willing and able to inform the Prime Minister that his government is on a political suicide course on this one deal alone considered to be of the same magnitude as that experienced by the Zardari-led government with respect to rental power projects (RPPs). In this context, one is compelled to praise the PPP as it had the courage to agree to a third party audit as the then Finance Minister, Shaukat Tarin, a technocrat and not a PPP loyalist, insisted on a third party audit for the then highly controversial RPPs.
The third party audit's conclusions were mind-boggling and noted that "contrary to the rules, Gencos (generation companies) did not obtain approval from Nepra of terms of the contract before signing. By applying for approval after signing a contract and when project is advanced it is forcing Nepra's hand and also raises question of transparency, encroachment on Nepra's mandate to ensure affordable and sustainable power supply." And that "overall, rental service agreements are weak in their legal structure, do not balance the risk sharing between the seller and the buyer and have many inconsistencies." Other facts that emerged from that audit as well as later audits include: (i) the generation capacity was almost equal to local demand; (ii) that generation was 10000 to 14000MW less than capacity depending on the time of year due to inter-circular debt, high transmission and distribution losses, obsolete machinery; (iii) the inability of the transmission lines to carry more than 15000MW at any one time; and last but not least (iv) the cost of the electricity would be high. These conclusions sadly are reminiscent of the LNG proposed deal as well.
The Prime Minister must review the third party audit findings and in the event that he does not have the time to peruse the voluminous report then perhaps he should ask his Minister for Water and Power to make a précis given that he was a party to the case of the controversial RPPs.
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