ISLAMABAD: Prime Minister Imran Khan is reportedly unhappy with Ministry of Energy (Power Division and Petroleum Division) for prolonged delay in finalisation of modalities required to resolve KE issues, well informed sources told Business Recorder.

On January 21, 2021, Prime Minister had given ten days to SAPM on Power, SAPM on Petroleum, Secretary Power and Secretary Petroleum to finalise modalities of possible settlement along with all possible options including arbitration to be worked out with pros and cons.

Both the Divisions were also warned that action may be taken for failing to comply with the directions of the Prime Minister as per given timelines and progress report may be submitted to the Prime Minister Office. However, the issue is still unresolved as SAPM on Power, Tabish Gauhar and recently removed SAPM on Petroleum Nadeem Babar were not on the same page in terms of "equity and fairness". Nadeem Babar argued that resolution of disputed amount should be on the basis of equity and fairness.

Power and Petroleum are now both with Tabish Gauhar who has a trust deficit with KE. A letter written by Tabish Gauhar, which is now the official viewpoint of Power Division, has also made things difficult.

Last month, Prime Minister had assured Abdulaziz Hamad Aljomaih, one of the largest business groups in Saudi Arabia, of full cooperation and support by the government in resolving matters pertaining to KE as well as impediments to the conclusion of Shanghai Electric Power (SEP)’s proposal to take 66.40 percent controlling stakes in KE.

Meanwhile, another Inter-Ministerial Committee (IMC) headed by Minister for Privatisation, Mohammad Mian Somoro held meetings to evolve a consensus on the Terms of Reference (ToRs) on Arbitration to resolve dispute receivables/ payables and future line of action.

At the last meeting of Inter-Ministerial Committee held in Privatisation Commission, a heated debate was witnessed between different participants including the SAPM on Power and removed SAPM on Petroleum due to which no consensus was evolved on ToRs of arbitration. The participants decided that the matter should be tabled before the Economic Coordination Committee (ECC) of the Cabinet along with comments from all stakeholders so that a collective decision is taken as one of the participants shared a decision on sugar subsidy due to which he was called by the FIA. NAB's fear is one of the key factors behind delay in important decisions. Nepra is also hesitant to support a proposal which says that if the government does not pay Tariff Differential Subsidy (TDS) in time, the additional financial impact should be recovered from consumers.

When contacted, a senior official in Privatisation Commission told this scribe that summary on KE affairs along with comments of stakeholders is almost ready for the ECC and will be dispatched any time during this week.

In addition to Tabish Gauhar's letter, Power Division in its views on KE's Arbitration proposals maintains that Government parties to the Arbitration Agreement need to have a separate discussion regarding: (i) processing of the case; (ii) parties to Arbitration; and (iii) authorities acting on behalf of Government of Pakistan to execute the Arbitration Agreement.

It further states that the draft handed over during the meeting envisages Secretary Power Division would execute the agreement whereas only two entities of Power Division, namely NTDC and CPPA-G have a dispute with K-Electric. Finance Division, Petroleum Division and Government of Sindh are also required to be parties to the Arbitration Agreement. The mandate/responsibility of the said three parties is beyond the scope of functions assigned to Power Division under Rules of Business, 1973.

CPPA-G is the party to this agreement, whereas it has receivables against KE under the contract. Consideration of "equity and fairness" under Clause-3, cannot be allowed to compromise the contractual interests of CPPA-G.

"Power Division also does not agree to determination of compensation to be paid by defaulting parties on the basis of principles of financing cost of the claiming party given in Clause-3 of the ToRs because the contractually obligated late payment surcharge to be paid by KE is based on the late payment surcharge on the same rate that CPPA-G has to pay to the power producers," the sources maintained.

Power Division has proposed that a separate mechanism amongst the Government parties be agreed as per clause-10 of Arbitration Agreement. Finance Division on behalf of Government of Pakistan has to commit in advance for payment and/ or setting-off of any claim on behalf of and amongst the GoP parties as provided in the Arbitration Agreement.

Copyright Business Recorder, 2021