AGP gives govt clean chit on Nandipur project

Report denies misappropriation in financial affairs, claims Khawaja Asif

ISLAMABAD:

The federal government has claimed that the Auditor General of Pakistan (AGP) has given it a clean chit on the Nandipur power project, saying that his audit report states there is no cost overrun or misappropriation in the project’s financial affairs.

The AGP, however, has raised questions on the appointment of the managing director, the under-capacity furnace oil treatment plant (FOTP) and the award of the project to a blacklisted foreign company, Water and Power Minister Khawaja Asif admitted at a news conference on Wednesday.



Flanked by Information Minister Pervaiz Rashid, Asif said Pakistan faced a loss of Rs12 billion because of the plant’s shutdown for three months. He held out an assurance that responsibility will be fixed and errant officials will be proceeded against.

“The AGP’s audit report has endorsed our claim that the project will be completed within Rs58.4 billion and there will be no cost overrun,” he said. “So far, around Rs51 billion has been spent on the project.”

He said the report would be forwarded to the prime minister and once he has seen it, it would be made public and the ministry would respond to the audit.



To address the concerns regarding the project, the government had initiated two separate audits by the AGP and the Ferguson firm. The AGP’s audit has been completed, while Ferguson’s is still under way.



The power minister said the report points a finger at not awarding the project’s operation and management contract to a company after a competitive bidding, as it was liable to be awarded in July 2015. He said that after competitive international bidding, the contract would be awarded in the next two or three months.

Although the FOTP is under capacity and two more skids will be added to the four skids already installed, the project has been operational since July 24 and is generating 445 megawatts, he added. “The contractor has been made to undertake the rectification and it will install two additional units to make up for the deficiency. However, for the time being, all four units are being utilised to match the requirements.”



Asif said the government was planning to convert the project to gas to reduce its generation tariff. “It will require 100 million cubic feet of gas per day and its allocation has been made already,” he said. “Once it is converted to gas, its generation capacity will rise to 500MW. The report has also recommended that the FOTP capacity be increased and the project be converted to gas. The suggestions are already being undertaken by the new management.”

The minister said the project was awarded to the Chinese company Dong Fang when it had not been blacklisted. “It was blacklisted in a Pakistan Railways project years after it was awarded the energy project.”

He said that while the report states that the project was awarded to a blacklisted company, it also says Dong Fang was blacklisted on June 21, 2013. “The Nandipur project was awarded to the firm in January 2008.”



As for the report calling the appointment of the Nandipur MD ‘illegal’ because there was no approved position of MD, Asif said the company’s board of directors had the authority to create such posts. “As far as experience of the MD is concerned, we believe that at that point in time, more of managerial experience was required to put the project back on track.”

Regarding financial implications of delaying work on the project for two years, the minister blamed the ‘incompetency of the Pakistan Peoples Party government’. “The financial implications on the economy were around Rs226 billion during these two years.”

The report says the Nandipur project was supposed to be completed in 2011. Asif said the project could not be finished because of some legal hurdles. “We restarted it in 2013 on the same PC-I blueprints, since 60 to 65% of the project had been completed. Until then, the exchange rate, charges and interests had piled up. It had been propagated that the project’s cost had reached from Rs21 billion to Rs84 billion.”



According to this report, added the minister, Rs51 billion have been spent out of Rs58 billion, which is the new cost for the project. “It has been proved by NEPRA and the official audit that the allegations of going over budget were exaggerated.”

Published in The Express Tribune, November 19^th, 2015.