FY 2015-16: AGP detects Rs 6.196 billion loss in KP Energy & Power Dept's accounts

The Auditor General of Pakistan (AGP) has detected a loss of Rs6.196 billion in the Energy and Power Department of Khyber Pakhtunkhwa in eight different cases during financial year 2015-16, according to Audit Report on the accounts of Khyber Pakhtunkhwa conducted during the year 2016-17.

According to the report already presented in the Khyber Pakhtunkhwa Assembly that was referred to Public Accounts Committee (PAC) of the house, a big loss to the tune of Rs5.025 billion has been incurred due to non-finalisation of power purchase agreement (PPA).

During the financial year 2014-15, in the Pakhtunkhwa Energy Development Organisation (PEDO), it was noticed from the record of the Ranolia Hydro Power Complex, Kohistan that contract for Operation and Maintenance (O&M) of the complex was awarded to M/s CEMTECH from 22-12-2014 without finalising PPA.

The record showed that energy generation was also not started till the last date of audit i.e. June 2016, rather officially Commercial Operation Data (COD) was not even announced, thus commercial energy production and export of energy also not started.

In the contract agreement duly signed by the parties it was mentioned that a quantity of 100.5GWh equal to 1,005,000,000 KWh annually would be producing during operation, which will accordingly be sold. Non-finalisation of PPA resulted in non-generation of 1,005,000,000 KWh of electricity and finally the estimated generated units could not be sold which resulted in per annum loss of Rs5,025,000,000 (1,005,000,000 x 5 per unit) to the organisation. WAPDA did not complete the transmission line due to which PEDO could not succeed in selling the units.

Audit is of the view that PPA was required to have been finalised that could have saved PEDO from such loss. The audit holds that loss occurred due to slackness on the part of local management both during construction phase as well as the time of process of PPA and COD.

When pointed out in June 2016 the management stated that written reply should be furnished later on. Audit requested the department repeatedly, through DO letter, for holding of the Department Accounts Committee (DAC) meeting, however, neither DAC meeting was convened nor any progress intimated till finalisation of the audit report.

The audit has recommended investigation into the matter at appropriate level to determine the lapses with fixing responsibility.

The second loss of Rs700.785 million was occurred to less recovery and was noticed during financial year 2013-14, in the office of the Managing Director PEDO wherein it was noticed that Pehur Hydro Power Project has generated 188,437,666 KWh since March, 2010. Against the COD on 01.03.2010 rate of Rs4.7195 KWh fixed by National Electric Power Regulatory Authority (NEPRA) while payment @ Re. per KWh was made by the WAPDA resulting into loss of Rs700.785 million.

Audit holds that loss occurred due to non-observance of government rules and procedure and when pointed out in August 2015, the management stated that detailed reply would be given later on.

In the DAC meeting held in October 2016, the department replied that since PPA has not been signed with Peshawar Electricity Supply Company (PESCO)/National Transmission and Dispatch Company (NTDC), we are receiving payments for energy sold @ Re.1 per KWh. As such, Rs700,785,000/- have been accumulated against PESCO as of today. DAC directed that full recovery should be made. No progress was intimated till finalisation of this report.

Audit has recommended that DAC decision be implemented and PPA be signed on priority.

The third loss of Rs184,503 million has been occurred due to claim of less than approved tariff from purchaser and further loss of Rs31.366 million due to non-inclusion of sales tax in the claim of energy.

The loss was noticed during financial year 2014-15 in the office of PEDO during the audit of the invoices of energy tariff payments related to Pehur Hydro Power Complex wherein the Director Operation & Commercial PEDO has claimed tariff rate of Re.1 per unit instead of 4.8159 approved in the tariff table attached with the PPA dully approved by the competent forum, which resulted into loss of Rs184,503,000 to the organisation.

It was further noticed from the monthly sheet of claims that Sales Tax at 17 percent was not included in the claim despite the fact that the other party (PEDO) has claimed the same for supply of electricity to complex. This not only resulted in further loss of Rs31,366,000 (Rs184,503,496 x 17 percent) to the provincial exchequer but also is a recurring loss.

Audit holds that loss due to claim of less than approved tariff from purchaser occurred due to non-adherence to the provisions of the approved tariff rate by the NEPRA, financial mismanagement and weak internal controls.

When pointed out in June 2016, the management replied that since PPA has not been signed with PESCO/NTDC we are receiving payment for energy sold @ Re.1 KWh. As such, Rs998,000,000 have been accumulated against PESCO as of today and said that the amount is not loss and is just outstanding payment.

The reply of the department was not tenable. Claims were required to be made on the agreed rate. No strenuous efforts were made to finalise the PPA.

Audit requested the department repeatedly, through DO letters, for holding of the DAC meeting. However, neither DAC meeting was convened nor any progress intimated till finalisation of this report.

The audit has recommended the recovery of the tariff as per PPA approved tariff rate along with sales tax.

Similarly, other losses of Rs70.00 million, Rs48.210 million, Rs9.035 million and Rs2.740 million have also been noticed in the KP Energy and Power Department during financial year 2015-16 due to non-finalisation of PPA, non-supply of spare-parts, less payment and non-recovery of outstanding government dues.

In all these cases, the audit has recommended inquiry, fixing of responsibility and recoveries.