KARACHI: The Federal Investigation Agency (FIA) has raised objections over the transfer of administrative control and sale of K-Electric’s (K-E) shares.
The FIA said that the power company owed Rs78 billion to the federal government but restraint was exercised in order to maintain the investor’s confidence in the company.
Investigations by the FIA revealed that K-E is a defaulter of Rs78 billion. The management of the company owes billions in respect of Sui Southern Gas Company (SSGC) bills and late payment surcharges during the past 12 years.
The agency has requested the government to ensure collection of dues before the sale of K-E shares to the Shanghai Electric Power Company. The Corporate Crime Circle of the FIA started investigating irregularities pertaining to the purchase of SSGC gas upon a 2014 application against K-E.
After the privatisation of the Karachi Electric Supply Company in 2015, both companies allegedly failed to sign a GSA contract with the SSGC. According to the rules, the SSGC cannot sanction gas supply without a proper contract. However, the company has been uninterruptedly supplying gas to the K-E grid at Bin Qasim.
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The FIA application also alleges that the SSGC bill amounts presented in the annual financial reports of both the institutions were differed from each other significantly. For example, during the fiscal years 2011-12 and 2012-13, as per the financial report of K-E, over Rs56 billion has been spent on the purchase of natural gas while the SSGC’s financial report shows selling only Rs9 billion worth of gas to K-E during the same period. Apart from these allegations, during the investigation it was disclosed that K-E is a defaulter of SSGC of Rs78 billion.
According to SSGC records, when the company was under the government’s control there were no dues owed to the SSGC by K-E. In November 2005, at the time of the company’s privatisation, the dues were Rs1 billion. After privatisation, remaining under Saudi Group Al Jamia till August 2008, these dues reached Rs12 billion.
And after the Abraaj group took over in September 2008 the dues reached a whopping Rs78 billion, of which Rs31 billion is the actual amount and Rs47 billion has been added as a late payment surcharge.
During the investigation, senior officials of the SSGC have confirmed that K-E and the SSGC did not enter into any contract for the sale of gas. The last agreement between the companies for the provision of 10 million cubic feet of gas was signed in 1978. On the other hand, K-E, in its financial report, confirmed that it is not obliged to pay any interest to SSGC on its dues. Hence, the FIA recommended that the federal government should not approve the sale of K-E’s shares until all the pending dues are cleared.
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The letter written by the FIA further states that K-E and SSGC are both profitable institutions that the federal government has a share in. The disciplinary action taken by FIA in this regard can affect the trust of the investors. However, a high-level committee should be formed, including FIA officials, to assure the collection of SSGC dues before K-E is handed over to its new owners.