Public Accounts Committee (PAC) has termed the payment of Rs 480 billion circular debt to Independent Power Producers (IPPs) dubious and directed for a re-audit of these payments. The committee chaired by Syed Khurshid Ahmed Shah examined the special audit report on clearance of circular debt of power sector (Rs 480 billion). In his ruling, Chairman Committee said that circular debt was retired in emergency without proper examinsation of the claims of IPPs.
Ministry of Water and Power failed to carry out pre-audit inspection of the payment claims of IPPs. These IPPs have obtained stay orders against the decision of the government for 'heat rate test' to determine the actual per unit cost of power generation.
The Chairman maintained that the Ministry of Water and Power should vacate the stay against conducting 'heat rate test'. The ministry should also carry heat rate test of IPPs and adjust the paid amount of Rs 480 billion accordingly. "If an additional payment was made to these IPPs, then the ministry must recover the amount," he added.
Earlier, Secretary Water and Power, Mohammad Younus Dagha, informed the committee that the Ministry of Water and Power has no authority to force the IPPs to agree on heat rate test. They could only request the NEPRA to direct the IPPs. However, the committee rejected his arguments.
Secretary Water and Power further explained that the payment was made in emergency as IPPs threatened them to invoke sovereign guarantees which could have a negative impact on the economy. Referring to energy policy 2002 and Power Purchase Agreement (PPA), the secretary said the government could not make private power producers mandatory to buy oil from Pakistan State Oil (PSO). Sheikh Rashid underscored the need for making it mandatory for IPPs to buy fuel from PSO to determine the real cost per unit and billing invoices.
Responding to a question, the secretary said that the size of circular debt in 2013 swelled to Rs 503 billion. Since 2014, it has been capped at Rs 320 billion. Pakistan People's Party government left Rs 460 billion circular debt by 2012. However, in 2012, Rs 239 billion was paid through bank borrowing.
Acting Secretary Finance, Shujjat Ali, informed the committee that the amount for retirement of debt reflected in the revised budget 2012-13. However, the figures were not mentioned in budget estimates of financial year 2013. The amount was released from account "Equity Head" of the government. The committee also showed its dissatisfaction over the ministry's claim that circular debt was paid in an extreme emergent situation as Economic Co-ordination Committee (ECC) directed the Ministry of Finance in its meeting held on June 27, 2013 for immediate clearance of the circular debt.
Responding to Chairman Committee, the acting secretary said the laid down procedure was not adopted as the authority assumed that the amount might lapse and there was no provision available for such a huge amount in the next federal budget. He further argued that such decisions were also taken in the past in emergency situations.
Auditor General of Pakistan (AGP) Rana Asad Amin, however, said that payment of Rs 341 billion to PEPCO by Finance Division on account of settlement of circular debt without pre-audit check of AGPR as prescribed by the AGP was 'irregular'. Member Committee Sheikh Rashid said per unit cost of electricity in Pakistan is comparatively higher as compared to India, Sri Lanka and Bangladesh. He argued that the private power producers are over billing in connivance with authorities. He further said that oil supply to power producers is available in black market in Muzaffargarh district.