Umar wants explosive power sector inquiry made public

Planning minister says move will help avoid allegations of protecting govt’s vested interests


Shahbaz Rana April 21, 2020
Panning and Development Minister Asad Umar. PHOTO: PTI

ISLAMABAD: Planning Minister Asad Umar on Monday proposed to make the explosive power sector inquiry report public to avoid allegations of protecting the government’s vested interests, as the findings revealed the masked details of investors’ favoured deals.

However, the Ministry of Energy has opposed the move to make the report public, fearing that it may have implications for Pakistan’s relations with other countries.

For instance, the inquiry report revealed that the $1.7 billion power transmission line project of the China-Pakistan Economic Corridor (CPEC) was 234% expensive than a similar project in India with better technology.

Umar made the proposal to make the inquiry report public during a meeting of the Cabinet Committee on Energy (CCoE), which he chairs.

Prime Minister Imran Khan entrusted the planning minister with the new responsibility of deciding the future course of action to take the power sector inquiry report to its next level.

The CCoE discussed two options whether to recommend forensic audit of all power projects at this stage or request the prime minister to form a commission under the Inquiry Commission Act of 2017.

Former Securities and Exchange Commission of Pakistan (SECP) chairman Mohammad Ali-led inquiry committee has submitted its findings on the power sector projects that the government of Pakistan contracted since 1994.

The findings showed that the deals were signed at the expense of interests of the consumers and the government of Pakistan.

On Friday, the prime minister handed over the responsibility of the report to Umar after taking it back from his Special Assistant Shahzad Qasim. The names of prime minister’s aides Razak Dawood and Nadeem Baber are among the beneficiaries of the investors’ favoured deals, although nothing illegal has been committed.

Power Secretary Irfan Ali was of the view that making the inquiry report public might carry implications for Pakistan’s international relations. However, the CCoE chairman said that the Foreign Office has been taken into confidence.

The matter of making the inquiry report public would now be presented before the federal cabinet for a decision today (Tuesday).

The report also sheds light on how government-to-government deals signed under the CPEC were unduly in favour of Chinese investors.

It discusses the $1.7 billion Lahore-Matiari transmission line project of the CPEC and compares it with a similar project in India that is built by a Swiss company.

The NTDC and State Grid Cooperation of China (SGCC) signed a cooperation agreement in April 2015 for development of 4,000MW, ±660 kV Matiari to Lahore High Voltage Direct Current (HVDC) Transmission Line. This project is included in the priority projects under the CPEC.

The report noted that the National Electric Power Regulatory Authority (Nepra) after the end of the proceeding approved a total project cost of $1.7 billion in November 2016. Within the approved cost, $1 billion was approved for converter stations. Since the project was awarded under CPEC through government-to-government agreement, hence, no bidding was carried out for the award of this project, according to the inquiry report.

However, a similar project was awarded in January 2017 in India through international competitive bidding at the time when Lahore-Matiari HVDC project approvals were given. The winning bidder was ABB, a Swiss-Swedish multinational corporation headquartered in Zurich. A Switzerland press release indicated that it was selected by Power Grid Corporation of India Ltd for the ±800 kV, 6,000MW Raigarh - Pugalur Ultra-HVDC link, which will transmit power from central India to consumers in the south, a distance of 1,830km (the longest in the world).

In the agreement, the convertor station’s cost was $640 million. “If convertor station comparison is made on megawatt basis, the approved cost for the Chinese company works out to be 2.34 times more than ABB's bid as illustrated,” according to the inquiry report.

The Indian transmission line project is high in specification as well as length and is still cheaper by $360 million, according to the committee. The impact of high cost of contract will be the contributing factors for high cost of energy for consumers in future due to capacity payments, it cautioned.

“The project is currently under construction, therefore, it is proposed to conduct forensic audit of the project by the federal government, and in case of any adverse findings, get the project cost reduced to prudent level,” according to the inquiry committee report.

For future, international competitive bidding should be the most preferred route of discovery of contract prices, recommended Mohammad Ali-led committee.

The inquiry committee also recommended that the transmission line project is awarded tariff under the take or pay regime but there are possibilities where the HVDC line may not be utilised as per the 98.5% approved availability because of outages of power plants in addition to scheduled and allowed forced outages, reduction in demand during off summer seasons, and increase in demand/consumption of southern region.

The inquiry committee report noted that as a result, the consumers would pay the capacity charges.

“To avoid the payment of underutilisation through the fixed capacity payments, it is recommended to shift the structure of project from the ‘current take or pay’ to ‘take and pay’.”

Depending on the utilisation factor, the saving over the 25 years’ concession period would range from Rs135 billion or 90% utilisation factor to Rs677 billion or 50% utilisation factor, according to the findings.

 

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