ISLAMABAD: The Auditor General of Pakistan (AGP) has unearthed 161 cases of contractual irregularities, unjustified/irregular payment, violation of regulatory laws and violation of internal rules, amounting to Rs1.212 trillion in the country's worst performing water and power sectors during FY 2019-20.

Power sector represents a broad canvas of entities ranging from government ministries to public sector entities and private power producing firms all having linkages with one another and having stakes in the power sector domain of the country. Some of the major players include 10 Discos, supplying, distributing and selling power (electricity) in their designated areas, CPPA-G- the power sector market operator, Nepra- the authority determining power tariffs, IPPs and fuel supply agents such as PSO, SNGPL etc.

According to the key 93 audit findings, in 22 cases, violation of regulatory laws and regulations promulgated by the regulatory authorities involving Rs 222.319 billion have been highlighted by the AGP.

In 16 cases, violation of internal rules and regulations of auditees entities involving Rs 31 billion have been pointed out, whereas 25 cases related to procurement/contractual irregularities involving Rs 26.720 billion were highlighted.

One case amounting to Rs 78.54 million was related to theft of material, 9 cases were of recoveries of Rs 3.255 billion which included accumulative power sector receivables. In four cases, irregularities pertained to the value for money and service delivery issues involving Rs 11.388 billion.

The AGP has also highlighted 16 cases of other issues like non utilization of loan and commitment charges, non-reconciliation of data, non-availing of rebate/discount facility and shortage/missing of material, etc, involving Rs 133.116 billion.

The power sector in Pakistan now has at its disposal excess energy capacity significantly more than the current or short term expected demand of the country. The installed power generation capacity in the FY 2019-20 stood at 35,735 MW including IPP based power having a volume (IPP thermal 17, 276 MW + IPP hydel 472) of 17,748 MW. The de-rated/or available capacity stood at 32,450 MW as on June 30, 2020. Whereas during June to September 2020, a maximum energy of 19,000 MW was generated and utilized for monthly consumption. Furthermore, at present the total bearing capacity of the national grid/NTDC was only 25,520 MW.

During the financial year 2019-20, capacity payments of Rs 451.72 billion were made to all power producing entities, whereas an amount of Rs 641.31 billion, on account of capacity payment was payable by CPPA-G to power producers as of June 30, 2020.

In the FY 2019-20, units worth Rs 1.5752 trillion were billed to consumers against which recovery of Rs 1.162 trillion was made, indicating a shortfall of Rs 410.228 billion (73.96 per cent of billing). The shortfall resulted in less receipts of revenue by the Discos. Revenue shortfall in Discos showed managerial inefficiencies and policy bottlenecks constraining CPPA-G to pay-off its energy procurement liabilities.

The accumulation of liability at part of CPPA-G comprises of different attributes. Receivables from Discos are one part. Other attributes include receivables from the government in lieu of energy subsidy, pending receivables from K-Electric and outstanding Late Payment Surcharge (LPS) levied by the power generation companies on CPPA-G on account of delayed payments instances.

The AGP states that as on June 30, 2020, the total amount of circular debt stood at Rs 2.045 trillion including PHPL loans of Rs 1.007 trillion.

The major constituents of the circular debt include outstanding capacity payments of Rs 614.314 billion and energy payment of Rs 248.281 billion. The overall circular debt increased from Rs 1.575 trillion in 2018-19 to Rs 2.045 trillion in FY 2019-20.

As a result of audit, a recovery of Rs 3,254,896 million was pointed out in the report, which includes accumulative power sector receivable. Recovery effected from January to December 2020 was Rs 95.558 billion.

Additional, theft of energy through Kunda connection, meter tampering and wrong reading etc are also prevalent in the Discos. There are also systematic issues as low recovery of dues from tube-well connections and delays in settlement of subsidy pertaining to AJK which contributes to the overall receivables pile up.

The AGP has recommended that management may ensure strong supervision and improved internal controls in order to minimize theft cases. Management has been asked to ensure that procurement are made in a transparent and efficient manner in line with PPRA provisions and procedures prescribed for the execution of works and are adhered to in letter and spirit.

Water Sector - The AGP has detected 68 irregularities of Rs 784 billion in water sector during FY 2019-20, details of which are as follows: (i) eight cases of irregularities in Procurement Management amounting to Rs.475.594 billion; (ii) irregularities in Contract Management amounting to Rs.6.565 billion were observed in 20 cases; (iii) Financial Management related issues amounting to Rs.287.305 billion have been pointed out in 17 cases; (iv) assets management issues amounting to Rs.836.51 million have been pointed out in 2 cases; (v) design related issues amounting to Rs.2.859 billion were observed in 3 cases; (vi) Management of Accounts with Commercial Banks related issues amounting to Rs.1.228 billion were noted in 1 case; (vii) HR and Pension related issues amounting to Rs.944.91 million were raised in 11 cases; (viii) issues relating to value for money and service delivery amounting to Rs.4.891 billion were observed in 2 cases; and (ix) other miscellaneous issues amounting to Rs. 12.632 billion were also reported in 4 cases.

The audit report includes observations resulting from the audit of expenditure of Rs 130.68 billion and receipts of Rs 88.51 billion for the FY 2019-20 pertaining to 41 formations of Ministry of Water Resources and its entities. The audit report also includes audit observations resulting from the audit of expenditure of Rs 6.51 billion and receipts of Rs 0.05 billion for the FY 2018-19 pertaining to 12 formations.

As a result of audit, recovery of Rs 6.585 billion is noted in the report. Recovery effected and verified by Audit from January to December 2020 was Rs 176 million.

Copyright Business Recorder, 2021