Inquiry into circular debt payments suggested

Finance committee unanimously adopts investigation report into alleged undue payments made in June 2013

ISLAMABAD: In a move that carries far-reaching implications for the government, a Senate panel on Tuesday unanimously decided to refer the case of the Rs480 billion circular debt payments to investigation agencies for a detailed probe after finding ‘criminal negligence’ and ‘blatant irregularities’.

The Senate Standing Committee on Finance and Revenue unanimously adopted a report of its subcommittee that conducted a parliamentary investigation into alleged irregularities and undue payments made in June 2013 to retire Rs480 billion circular debt.

The subcommittee has unanimously recommended that the case should be referred to either the National Accountability Bureau or the Federal Investigation Agency while seeking recoveries of Rs60.7 billion from Independent Power Producers (IPPs).



“This is the second time that the committee has referred a case to NAB after sending the case of irregularities in the privatisation of Heavy Electrical Complex,” said Senator Saleem Mandviwalla, the chairman of the standing committee.

Senator Mohsin Aziz of the Pakistan Tehreek-e-Insaf was the convener of the subcommittee while PML-N’s Senator Saud Majeed and PML-Q’s Kamil Ali Agha were its members.

All three members have signed the report that will now be tabled before the upper house of parliament for adoption and its subsequent referral to NAB or the FIA.

The parliamentary investigation primarily focused on a report compiled by the Auditor General of Pakistan (AGP) on the clearance of the circular debt. Even the AGP report showed that the PML-N government had failed to adequately verify all claims before retiring the circular debt and made ‘avoidable payments’ amounting to Rs165 billion to power producers.



The Senate’s findings also raise a question mark on the working of the Public Accounts Committee that has already set aside the AGP objections, which was apparently the result of a political compromise.

The decision to refer the case to investigation agencies comes at a time when the government is already under pressure due to its tense relations with the security establishment and the Supreme Court judgment on the Panama leaks case.

The government had claimed that the payments were made to ease cash flow problems being faced by the power sector at that time.

“The parliamentary investigation report has been prepared by setting aside political affiliations, and now the case should be made an example for all times to come,” said Senator Mohsin Aziz, while presenting the report’s main findings.



He specially thanked Senator Saud Majeed for endorsing the report.

“Serious irregularities and criminal negligence have been established in this case,” said Senator Aziz.

“By proclaiming an emergency situation, the finance ministry had cleared the payments within 24 hours but our findings have shown that there was no emergency-like situation at that time,” said the convener of the subcommittee.

The committee report also endorsed the AGP report that the PML-N government cleared the entire circular debt on June 28, 2013 without performing a mandatory pre-audit function.

According to the report, the finance ministry disregarded a pre-agreed release mechanism, bypassing the Accountant General of Pakistan Revenue (AGPR) and directing the State Bank of Pakistan (SBP) to release the money.



“Out of Rs480 billion, we have recommended to recover Rs60.6 billion from the IPPs,” said Senator Aziz, adding, “Making Rs480 billion payments without due process was like a daylight robbery.”

Among the IPPs that may be affected from the recovery decision are Attock, Atlas and Nishat.

The act of making Rs32.5 billion unjustified payments was criminal, according to the committee report. It added that the AGP informed the committee that the NTDC had provided them only the merit order policy while they have not provided the economic dispatch order.

The committee has also asked the government to set aside Rs22.9 billion liquidated damages claims of the IPPs instead of deferring the matter. It also declared ‘idle capacity payments’ as irregular and called for their recovery.

“The non-cash settlements by the government are also illegal,” according to the report.

Moreover, the payments of Rs2.7 billion to the IPPs due to their lack of inventory are also recoverable.