Blackout: Court strikes down rental power deals

Declares all such contracts ‘illegal’; asks NAB to initiate inquiries against all responsible, including...

Azam Khan March 31, 2012

ISLAMABAD: They came. They idled. They produced little (or no) electricity.

And then, in a hard-hitting verdict on Friday, all rental power project (RPP) deals were declared ‘non-transparent, illegal and void ab initio’ by the apex court.

The court directed the National Accountability Bureau (NAB)  to proceed against all government functionaries involved, including the ministers for water and power during whose tenure the RPPs were approved or set up, and the minister and finance secretary holding charge when down payment for RPPs was increased from 7% to 14%.

Liaquat Jatoi and Raja Pervaiz Ashraf were water and power ministers in 2006 and 2008, respectively, while Shaukat Tareen was the finance minister in 2008, when down payment was increased.

A two-member bench comprising Chief Justice Iftikhar Muhammad Chaudhry and Justice Khilji Arif Hussain heard the case on various dates. Authored by the chief justice, the 90-page verdict recommended initiation of legal proceedings against all those involved in these projects.


Federal Minister Faisal Saleh Hayat and Pakistan Muslim League-Nawaz MNA Khawaja Muhammad Asif had challenged the RPP projects, contending that these plants were producing a meagre amount of electricity, despite billions of rupees having been spent on them.

The government’s attorney was unable to rebut the contention raised by the petitioners.

The verdict said that public-sector power companies and authorities, the federal government and the finance ministry are responsible for losses worth billions – by making 7% to 14% down payments to, and purchasing electricity on higher rates, from RPPs.

The court observed that the RPP policy was not defined on the basis of transparency and that the money should be recovered with outstanding mark-up.

Similarly, all functionaries of Pepco, Gencos and Nepra, along with sponsors who derived financial benefits from RPP contracts are, prima facie, involved in corruption and corrupt practices, the court said in its ruling.  They are, therefore, liable both for civil and criminal action, it added.

‘Total failure’

The court’s judgment said that RPPs’ mode of electricity generation has proved to  be ‘a failure’ and incapable of filling the gap between power demand and supply on a short-term basis.

Of the 19 RPP deals signed initially, only nine were allowed to function after a damning Asian Development Bank evaluation report. Subsequently, six of those nine RPPs were discontinued. They have returned the advance payments in pursuance of orders passed by this court, the judgment said.

The three remaining are producing a meagre amount of electricity, despite being paid billions: Karkey is generating 48.33 MW against a capacity of 231 MW, Naudero-I is generating 9.16 MW against a capacity of 51 MW and Gulf is generating 50.1 MW against a capacity of 62 MW. Neither of these three has returned their advance payments so far.

If these three are allowed to continue, further payments to them would be at the expense of the public exchequer with no corresponding benefit to the consumers, the verdict held.

All RPPs are collectively generating 120 MW of electricity, the judgment said.

Citing an example of the excesses in the RPPs scandal, the verdict said that Pakistan Power Resources (Piranghaib, Multan) did not generate electricity at all although $14.58 million was given in down payment, which has not been returned.

The court directed the government to improve the existing system of generation and transmission of electricity, instead, since the country has sufficient installed capacity which is not utilised due to bad governance and circular debt.

(Read: Rental power — SC verdict)

Published in The Express Tribune, March 31st, 2012.


far | 9 years ago | Reply

corruption at all levels ...may ALLAH protect us from these corrupt politicians

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