ECC may stop payments to IPPs

Payments to be halted in wake of probe into excess profits of IPPs

Our Correspondent March 17, 2021
It was suggested in the ECC meeting that the process of signing arbitration submission agreements with the IPPs under the Power Policy 2002 may be halted till the end of NAB probe. PHOTO: REUTERS


The Economic Coordination Committee (ECC) is likely to approve the withholding of billions of rupees worth of payments to the independent power producers (IPPs) following an investigation launched by the National Accountability Bureau (NAB).

The Inquiry Committee on Power has said that the IPPs had received excess payment of Rs1,000 billion. However, rather than demanding the return of payments, the government has signed a revised deal with the IPPs for payment of Rs403 billion to them.

In its last meeting, the ECC deferred discussion on the issue. However, it is likely to take up the matter in its meeting scheduled for Wednesday (today).

In the meantime, relevant record of the deal with the IPPs has been provided to NAB Lahore.

The ECC was told that since NAB was apparently conducting an investigation into the alleged excess profit, it would be appropriate to wait for conclusion of the probe before going ahead with payments to the IPPs.

It was recommended that payments to all the IPPs under the Power Policy 2002, which had signed agreements, may be withheld till the conclusion of NAB investigation. However, it was proposed that payments to all other IPPs may be given according to the signed agreements.

It was also suggested in the ECC meeting that the process of signing arbitration submission agreements with the IPPs under the Power Policy 2002 may be halted till the end of NAB probe.

Earlier, the Cabinet Committee on Energy and the ECC reviewed a report prepared by an implementation committee mandated to convert memoranda of understanding (MoUs) into binding agreements, and approved the payment mechanism and agreements with the IPPs in meetings held on February 8, 2021.

These decisions were ratified by the cabinet on February 9. Agreements were signed with the IPPs following the cabinet’s approval.

As per the payment mechanism, the first installment is to be paid to the IPPs within 30 days of the signing of agreements.

The excess profit for the IPPs had been highlighted in a report of the Committee for Power Sector Audit, Circular Debt Resolution and Future Roadmap.

The MoUs contained a clause which said that in order to assess if the IPPs had made any excess profits, the reconciled numbers would be submitted to the National Electric Power Regulatory Authority (Nepra).

As a legal body, Nepra will hear and decide the matter in accordance with the Power Policy 2002.

NAB has said that it is conducting investigation into allegations of corruption and corrupt practices against owners/ management of a power company, officers/ officials of Nepra, officers/ officials of the Central Power Purchasing Agency (CPPA) and others. It has asked for provision of relevant record and present status of the MoUs.

Housing finance

The ECC will also consider in its meeting the payment mechanism for housing subsidy.

Chairman of the Naya Pakistan Housing and Development Authority (Naphda), in a communication, referred to the special incentive package for the housing and construction sector announced by Prime Minister Imran Khan in July 2020 and its impact on the construction sector.

The incentive package includes mark-up subsidy on bank financing for 10 years and cost subsidy of Rs300,000 per housing unit.

The cost subsidy will also be paid to the individuals nominated by the government(s)/ development authorities, and other entities like the Workers Welfare Fund. However, the cost subsidy in such cases will be strictly subject to the fulfillment of eligibility criteria.

An amount of Rs30 billion has been allocated for the current financial year in subsidy for Naphda against 100,000 housing units under the first phase. A summary on the cost subsidy containing the proposed eligibility criteria as well as payment modalities had been circulated to obtain views of relevant stakeholders, which included the Cabinet Division and Finance Division. Both supported the proposals as well as the State Bank of Pakistan.

Keeping in view the input received from the stakeholders, the criteria for payments, selection of applicants, release of funds, release of payment from the Escrow Account and default mechanism were formulated.

The Naphda policy board, in its meeting held in February 2021, considered the eligibility criteria and payment mechanism, and told the authority to submit a summary for ECC’s consideration and approval.

Published in The Express Tribune, March 17th, 2021.

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