In February of this year, a new PEPCO power plant was due to become operational at Nandipur which would have supplied 450 MW of much-needed electricity to industry, agriculture and households. Unfortunately, inaction by the federal government has delayed its completion by more than two years.
In January 2008, Pepco signed a $329 million contract with Dong Fang Electric of China and paid it a 10 per cent down payment. The ministry of finance issued a sovereign guarantee for this project, on the basis of which Dong Fang put together a consortium of lenders who established a Letter of Credit for the import of the equipment. By mid-2010 much of the work at this plant was complete, the turbines were in place and it looked like the project would be finished on schedule in early 2011. This activity took place in anticipation of the ministry of law and justice approving the financial agreements and the sovereign guarantee issued by the Ministry of Finance — a routine process in such projects, normally taken as a matter of course.
Bizarrely, this was not the case here. Instead, the ministry chose to sit on the matter for over a year, despite the urgency of Pakistan’s power requirements. As a result, the lenders stopped their funding, the equipment was not cleared at the port, and the project came to a grinding halt. The remaining equipment, which consists of more than 4,500 packages of plant and machinery have since been lying in the open at Karachi port for over a year, at a demurrage cost of Rs700 million. These packages are a standing testament to inefficiency, negligence and corruption.
In the same year, a second, identical, 450MW power plant had been agreed for Chichon kee Mallian, with the same contractor, Dong Fang, and the same consortium of lenders for a contract price of $352 million (approx Rs31 billion). Here also, Pepco made a 10 per cent down payment, and the project was scheduled to be completed in February 2012. However, after the incomprehensible behaviour of the law ministry in the Nandipur project, the financing consortium refused to establish the letter of credit until all outstanding clearances were issued. As a result, the project has also been delayed by at least two years. Resuming both the projects today at current prices and exchange rates, settling claims by the contractor as well as additional financial charges, will entail an additional cost of about $200 million (approx Rs18 billion), aside from the two year delay, lost earnings through lost exports, and jobs that the higher power output would have created in the nation’s economy.
The real tragedy, though, is the delay in the nation being able to use the additional 900 MW — almost one fifth of Pakistan’s present shortage — that these two plants would have generated (bearing in mind that the economy is losing approximately 2.5 per cent of GDP on account of lack of power).
After the repeated requests of the Punjab government (although this was a project that would have benefited not just Punjab but the whole country), the prime minister has finally instructed the law ministry to approve the financial arrangements and the sovereign guarantee issued by his own ministry of finance. The ECC has had to waive the customs duties and demurrage for the equipment lying at the port, and it is hoped that these two projects undertaken by the federal government may now resume.
Above all, the ongoing damage to our economy means the loss of jobs to thousands of people, and countless hours of unnecessary, avoidable and painful load-shedding for millions of households over the next few years. As for the law ministry, it might hide its bureaucratic inefficiency over some weak pretext — after all corruption always shelters behind weak excuses. But which of the ministry’s spokespersons can justify this criminal delay in a matter so vital to the well-being of our economy!
The people must rid our country once and for all of parasites; the people must seize these looters by the collar and demand answers in the name of the generations whose futures have been so deceitfully squandered by the scavengers of Pakistan. By the pen or by the long hard road, we will save this country.
Published in The Express Tribune, September 4th, 2011.
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