Litigant knocks top court's door against IPPs

Claims disposal of state largesse without competitive bidding

ISLAMABAD:

The Chamber of Commerce and Industry has approached the Supreme Court against independent power producers (IPPs).

"Declare the 1994, 2002 and 2015 policies null and void because they permitted (and continue to permit) the disposal of state largesse without competitive bidding and without any rational basis," requested the Chamber of Commerce and Industry through a constitutional petition against thermal power projects to produce electricity.

Advocate Faisal Naqvi has filed the constitution petition which pleaded with the SC to declare that the government of Pakistan and its instrumentalities cannot profit from the provision of essential facilities (such as electricity) to the general public. It is further prayed the SC direct the government of Pakistan to commission a detailed and thorough forensic audit of all IPPs.

The petition pleaded that the SC direct the government of Pakistan to implement the 2020 report in letter and spirit, inter alia, by recovering excess profits earned by IPPs, renegotiate all agreements and change them from "take or pay" to "take and pay".

It asked that anomalies on the calculation of IRR from all IPP agreements be removed, and withdrawing all such directions as allowing the dollarisation of amounts not actually invested or borrowed in foreign currencies."

The petition prayed that it is the responsibility of the government of Pakistan, under Article 9 of the Constitution, to ensure the supply of electricity on a least cost basis to the citizens of the country.

The petition states that one of the main reasons for Pakistan's perennial economic crisis is the power sector. "Pakistan is on track this year to pay approximately Rs3.58 trillion in payments to electricity generating companies. Out of this total amount, approximately Rs2.63 trillion is likely to be recovered, while the remainder will be subsidised by the GoP. This unrecovered amount will be added to already existing stocks of circular debt, says the petition.

"Currently, Pakistan has an installed generation capacity of 45,885 MW. Out of this, 23,860 MW (52%) has been installed by state-owned entities (both federal and provincial) while the remaining capacity of 22,043 MW (48%) has been installed by IPPs. It is important to note that as against its installed generation capacity of 45,885 MW, the maximum power demand during the summers is around 30,000 MW while winter peak loads are closer to 12,000 MW.

Notwithstanding this current oversupply of electricity, IPPs are scheduled to add another 7,460 MW of electricity by 2032. This capacity is in addition to the 11,550 MW due to be added through the GoP's own projects (such as the 4,320 MW Dasu Hydroelectric Project (due for completion in 2026), the 4,500 MW Diamer-Basha Hydroelectric Project (due in 2029), the 1,530 MW Tarbela 5 extension (due in 2026), and the 1,200 MW Chashma 5 nuclear plant (due in 2031).

It is contended that there is now no dispute that the state does not have the unfettered right to enter contracts in any manner and terms it pleases. Instead, all contracts involving the disposal of state largess must be decided in an open, fair, reasonable and transparent manner, the petition reads

"The failure of the GoP to have a full forensic audit conducted amounts to a gross dereliction of its duty to protect the interests of the citizens of Pakistan. The 2020 report spells out, in considerable detail, the ways in which various IPPs have acted in violation of their agreements and have accrued excess profits worth billions of rupees. As compared to this, the 2020 report itself notes that the committee had reached agreement with an international consultant to carry out a forensic audit for a total amount of Rs22 million, but that this budget was never approved."

It is stated that even if it is assumed that the GoP has the freedom to enter into contracts for the supply of electricity, other than through competitive bidding, it follows that the government does not have the mandate to allow private parties to make extortionate profits from the supply of an essential commodity.

Meanwhile, the Lahore High Court Bar Association (LHCBA) also approached the SC, requesting it to declare the Power Generation Policy 1994 unconstitutional. The LHCBA also requested the top court to declare other relevant policies unconstitutional.

It requested the summoning of details of independent power producers, including the details of ownerships. LHCBA has requested the apex court to summon the details of IPPs that do not generate electricity in the country.

The LHCBA, in its petition, maintained that the unilateral agreements with IPPs are non-transparent, illegal and un-Islamic, adding that expensive electricity is a violation of Article 18 of the Constitution.