Another blow: JJVL loses review petition, right to extract LPG
Second setback after project annulled due to irregularities in December 2013 .
The plant built with an investment of $105 million extracts LPG components from the system of Sui Southern Gas Company. PHOTO: FILE
KARACHI:
The Supreme Court of Pakistan on Wednesday dismissed a review petition of Jamshoro Joint Venture Limited (JJVL) against an earlier decision of the apex court that cancelled its rights to extract liquefied petroleum gas (LPG) in Sindh.
JJVL, the brainchild of Lahore-based businessman Iqbal Zafaruddin Ahmed, was dealt a severe blow in December 2013 when the Supreme Court annulled the project citing irregularities in the way LPG extraction rights were awarded.
Subsequently, the sponsors of JJVL filed a review petition to save the project, which had made Ahmed more enemies than friends since it started production in 2005.
“The passionate and zealous involvement of the judiciary in commercial transactions, even those that are past and closed, should be a source of concern and insecurity for all investment,” said JJVL Director Fasih Ahmed.
“At the very minimum, those investing in Pakistan should mitigate risks by demanding ironclad clauses for international arbitration, which provide for fair hearing.”
The plant built with an investment of $105 million extracts LPG components from the system of Sui Southern Gas Company (SSGC). It is the single largest producer of fuel in the country.
Now as per court’s decision, SSGC will begin talks with JJVL to determine the acquisition price of the extraction plant.
JJVL ended up in court after PML-N’s Khawaja Muhammad Asif, now the Defence Minister, approached it in 2011.
A court-appointed committee comprising an ex-government official M H Asif and renowned accountant Shabbar Zaidi has already valued the plant at Rs3.2 billion.
JJVL says it is worth much more.
One important reason that the Supreme Court had struck down the project was the benchmark for calculating royalty payments. JJVL extracts LPG from SSGC system against a price of gas and a royalty, which makes up for the gas utility’s profit.
The court declared that the royalty was to be calculated on Saudi Aramco’s contract price plus the freight cost, which means the imported cost of LPG.
But JJVL paid royalty on the basis of the highest producer price prevailing in Pakistan, causing a loss of over Rs22 billion to the exchequer, it says.
But in its review petition, JJVL said it never agreed to the royalty formula which would use import cost of LPG, which was expensive than that produced in the country. Doing so would make its product expensive than those of other local producers, it said.
Any link with imported LPG would not just have increased JJVL’s cost but also open doors for the fuel’s import, it said.
The apex court had also tasked Federal Investigation Agency (FIA) to investigate the deal and fix responsibility in case of any wrongdoing.
Published in The Express Tribune, June 5th, 2014.
The Supreme Court of Pakistan on Wednesday dismissed a review petition of Jamshoro Joint Venture Limited (JJVL) against an earlier decision of the apex court that cancelled its rights to extract liquefied petroleum gas (LPG) in Sindh.
JJVL, the brainchild of Lahore-based businessman Iqbal Zafaruddin Ahmed, was dealt a severe blow in December 2013 when the Supreme Court annulled the project citing irregularities in the way LPG extraction rights were awarded.
Subsequently, the sponsors of JJVL filed a review petition to save the project, which had made Ahmed more enemies than friends since it started production in 2005.
“The passionate and zealous involvement of the judiciary in commercial transactions, even those that are past and closed, should be a source of concern and insecurity for all investment,” said JJVL Director Fasih Ahmed.
“At the very minimum, those investing in Pakistan should mitigate risks by demanding ironclad clauses for international arbitration, which provide for fair hearing.”
The plant built with an investment of $105 million extracts LPG components from the system of Sui Southern Gas Company (SSGC). It is the single largest producer of fuel in the country.
Now as per court’s decision, SSGC will begin talks with JJVL to determine the acquisition price of the extraction plant.
JJVL ended up in court after PML-N’s Khawaja Muhammad Asif, now the Defence Minister, approached it in 2011.
A court-appointed committee comprising an ex-government official M H Asif and renowned accountant Shabbar Zaidi has already valued the plant at Rs3.2 billion.
JJVL says it is worth much more.
One important reason that the Supreme Court had struck down the project was the benchmark for calculating royalty payments. JJVL extracts LPG from SSGC system against a price of gas and a royalty, which makes up for the gas utility’s profit.
The court declared that the royalty was to be calculated on Saudi Aramco’s contract price plus the freight cost, which means the imported cost of LPG.
But JJVL paid royalty on the basis of the highest producer price prevailing in Pakistan, causing a loss of over Rs22 billion to the exchequer, it says.
But in its review petition, JJVL said it never agreed to the royalty formula which would use import cost of LPG, which was expensive than that produced in the country. Doing so would make its product expensive than those of other local producers, it said.
Any link with imported LPG would not just have increased JJVL’s cost but also open doors for the fuel’s import, it said.
The apex court had also tasked Federal Investigation Agency (FIA) to investigate the deal and fix responsibility in case of any wrongdoing.
In its report, a copy of which is available with The Express Tribune, FIA did not find any criminal intent, corruption, negligence or any evident of kickbacks.
Published in The Express Tribune, June 5th, 2014.