Rental power saga: Court gives an economic paper instead of a legal order

Concessions, poor performance, high costs have been construed as evidence of corruption, according to Supreme Court.

LAHORE:

The Supreme Court of Pakistan had agreed to not to interfere in economic matters, however, the detailed judgment in the matter of Rental Power Projects (RPPs) shows the apex court has charted into that territory once more.

In Watan Party against Federation of Pakistan six years ago, the Supreme Court of Pakistan maintained that “…economic expediencies lack adjudicative disposition and unless the economic decision, based on economic expediencies, is demonstrated to be so violative of constitutional or legal limits on power or so abhorrent to reason, the Courts would decline to interfere.”

I have taken the pain of reading and reviewing the complete text of the Supreme Court’s judgment in the matter of RPPs. The general tone and impression of the Supreme Court verdict is economic and managerial in nature, and to a lesser degree, legal.

More than adjudication on a question of law, this reads like a paper on economic analysis on the performance of RPPs converging on the high costs and price hikes issues. For instance, it argues that “[Data presented] shows that unit cost per kWh of electricity procured from RPPs is exorbitantly on the high side and the electricity generated by RPPs is then to be transmitted to NTDC, which is responsible for its further supply to the consumers after adding charges of overhead transmission and dispatch.”

Although the courts have all the right to debate on the question of facts, such as above, it may be noted, in the light of the Supreme Court own observation, economic policy is too complex to be adjudicated in a court of law. The grey matters of business and economics cannot be explained in the black and white language of law. The same argument of high cost was extended against the IPPs in the nineties and now even the worst detractors of Pakistan Peoples’ Party hail that decision, which brainwashed all memories of load shedding for ten good years.

I have complete faith in the judiciary and respect the judicial notion that there would have been systematic corruption in the matter of the RPP projects. However, the Court’s argument for proving the corruption is debatable, and since its decision is now a public property, it must be thoroughly examined.

In a nutshell, the rationale of Supreme Court’s verdict can be summarised like this: the concessions in contractual terms and conditions, sub-optimal performance of the companies running RPPs and the exorbitant costs of the electricity generated through the RPPs are sufficient reasons to believe that there has been corruption.

Read again: concessions, poor performance and high costs have been construed as evidence of corruption! It seems that the Court has castigated the defendants by assuming their corruption on account of economic uncertainties and contractual complexities.

The judgment does draw on the relevant laws requiring transparency and fair competition and holds that the Public Procurement Rules of 2004 were blatantly violated. By doing this, however, the Supreme Court shows disregard to a decision made by the Economic Coordination Committee of the federal cabinet, which had exempted the RPPs from the Procurement Rules. Current judgment of the Supreme Court on RPPs has serious and lasting repercussions for the regulatory institutions, foreign investment and overall governance. If the government enters into a contract, and the court interferes five years later, and annuls the contract, there is no need to second guess the preference of investors.

They will all go to a state where contract enforcement is practiced. The current decision will do more harm than good with respect to investment scenario.

If private sector firms are able to function, profit and even steal, the blame should really be on the state for failing to arrest corruption. As the libertarian thinker Khalil Ahmad argues in his latest book on the rise of state aristocracy in Pakistan, responsibility of our crisis should be fixed on the watchmen, and not on thieves. A society, which declares its businessmen thieves, and spares the watchmen, can deserve only perpetual darkness.

The writer works as a principal consultant at Development Pool and is a founding member of Economic Freedom Network Pakistan

Published in The Express Tribune, April 23^rd, 2012.