Amid revelations of overpayment of billions of rupees to oil suppliers and power producers while clearing Rs480 billion worth of circular debt, the federal government has hired an audit firm, Deloitte Pakistan, to unearth any wrongdoing.
The move came in an attempt to address the concerns of industry people, but also exposed ill-planning by the Ministry of Finance that made huge payments running into billions of rupees without performing a pre-audit of the claims. The responsible government ministries did admit to the hiring of the audit firm, but shifted responsibility on each other.
Services of Deloitte Pakistan, owned by Asad Ali Shah, the son of Sindh Chief Minister Qaim Ali Shah, were hired after complaints of making payments to the oil suppliers against shipments that were never made and against electricity that was never produced, revealed sources in the ministries of water and power and finance.
Denting its credibility further, the Ministry of Water and Power did not invite bids from audit firms and instead picked Deloitte to perform the task, which may expose corrupt elements of the past regime and in the new government as well, sources said.
Issues of oil theft and fake electricity generation had also come in the limelight during the tenure of the previous government, but they were swept under the carpet as some of the federal ministers were said to be involved in the dirty business, sources said.
So far, nothing can be said with certainty but according to allegations levelled by the industry people and the sources, the overpayments have been estimated at over Rs50 billion out of Rs480 billion. Sources said there were differences between Finance Minister Ishaq Dar and Finance Secretary Dr Waqar Masood on the same issue but Dar pushed ahead with his plan to clear the circular debt.
The Ministry of Finance had wiped Rs342 billion off the circular debt before June 30 and the remaining Rs138 billion was cleared on July 20. Out of the Rs480 billion, Rs75 billion was paid to Hub power plant, Rs41.4 billion to Kapco, Rs6.9 billion to AES Pakgen, Rs4.6 billion to AES Lalpir, Rs9.9 billion to Liberty power plant, Rs19.2 billion to Uch plant, Rs8.6 billion to Rousch power plant and Rs8.9 billion to Engro power plant.
An amount of Rs26 billion was paid to PSO in cash in addition to Rs48.6 billion in shape of bonds.
“The Ministry of Finance made payments on the basis of certified accounts provided by the Ministry of Water and Power,” said Shafqat Jalil, the Director General Media of the Finance Ministry. He said the audit firm was also hired by the Ministry of Water and Power.
Pakistan Electric Power Company (Pepco) provided reconciled accounts to the water and power ministry that handed over the list to the finance ministry, thus, responsibility for any irregular payment would fall on the water and power ministry, officials said.
However, Water and Power Minister Khawaja Asif said his ministry had nothing to do with the circular debt payments and hiring of the audit firm. “The audit has been ordered by the Ministry of Finance,” he added.
According to a senior official of the finance ministry, the audit of debt payments was part of a recent agreement with the International Monetary Fund and was made part of the deal on the insistence of Asian Development Bank.
Special Assistant to Prime Minister Dr Mussadaq Malik said figures of independent power producers (IPPs) and power purchasers often did not match, underscoring the need for a third party audit.
He admitted that oil theft was going on in the power sector and 7% to 10% of oil payments were siphoned off by the oil mafia. The theft was continuing in connivance with PSO officials and IPPs, he added.
Malik said the government made payments to the IPPs on the basis of net power generation but there was no mechanism to verify the efficiency claims of the IPPs, which say they were consuming more oil due to low efficiency.
IPPs’ Advisory Council Chairman Abdullah Yousuf claimed that the IPPs received payments on the basis of reconciled figures and said the audit firm was hired to check leakages in the government system.
Published in The Express Tribune, July 23rd, 2013.
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COMMENTS (9)
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@M-ALI He is an influential partner of Deloitte and can influence the outcome of the audit report. Giving favorable audit reports is not uncommon.
It was important to clear the circular debt without further delay. The power generation cannot be improved if generation companies have no money. If over payment is discovered in the audit, it can easily be adjusted against future payments to these companies. These companies are regularly selling power to the governent there should be no problem in recovering the amount overpaid (if any).
"Owned by Asad Ali Shah"? Since when does internationally recognized audit firms are owned by some Pakistani Chartered Accountants? Asad Ali Shah is a partner in the firm and is bound by International Auditing standards. Any deviations or malpractice would degrade Delliotte International's name so he wouldn't dare do it. This is the first time a sensitive assignment like this is given to a prestigious firm so results will be positive.
I must say this is the good and positive approach from Pakistani politician and Asad Ali Shah is the son of Qaim Ali Shah ? Oh yes he is.
10 percent is standard minimum.
Although I am not a proponent of Capital Punishment( death penalty), but in corruption cases in Pakistan the NA should pass the law for death penalty to those who are involved in corruption regardless who they are. It seems to me that every nook and cranny of Pakistani society has gone corrupt and those who are suppose to watch out for corruption are corrupt themselves. There is no limit to greed and ill- gotten money and then they go to pray and call themselves Muslims. What a hypocrisy in the land of pure. Is there any institution in Pakistan which is not involved in any form of corruption, looks like the whole system is corrupt to the core. Death penalty might just remedy the situation and if that does not work then only God could save this country.
oh wow this is truly a positive step for pakistan!
Asad Ali Shah, son of Qaim Ali Shah. There goes the entire audit exercise .....
Services of Deloitte Pakistan, owned by Asad Ali Shah, the son of Sindh Chief Minister Qaim Ali Shah, were hired after complaints of making payments to the oil suppliers against shipments that were never made.
Muk Muka for tomorrow's CCI meeting?