ISLAMABAD    -   Sub-Committee of Senate Standing Committee on Power has observed that an overpayment of Rs 955 billion has been made to the IPPs during past six years which has increased the circular debt.

About 75 percent of 187 Independent Power Producers are operational and if all of them are financially evaluated the assumption is that more than 2000 billion is recoverable from them, said Senator Nauman Wazir Khattak while chairing the meeting of the Sub-Committee of Senate Standing Committee on Power here. Nauman Wazir, who is also convener of the sub-committee, observed that for 40 Thermal Power Stations (average generation time till date of 10 years), the GoP has paid Rs 955.728 billion extra to the lPPs.

Sub-Committee of Senate Standing Committee discussed the issues of high tariff, capacity charges, heat rates and calculation of pay back periods of IPPs and presented a detailed analysis of how the overpayments to Independent Power Plants have greatly contributed in the circular debt of the power sector and the private businesses have flourished while damaging the national exchequer owing mainly to the poorly and haphazardly designed agreements.

The meeting was attended among others by Senator Agha Shahzaib Durrani, Senator Muhammad Akram, Bahadur Shah acting chairman NEPRA, Sajid Akram Additonal DG Tariff NEPRA and officials from the ministry and NEPRA.

According to the research conducted by the Committee major IPPs have enjoyed alarmingly high ratios of profit over the last few years which was termed to be mainly because of giving returns on profits instead of giving returns on the investment equity. The Committee observed that the state is overpaying these units and this cannot be happening without internal malafide of NEPRA which seems to be protecting IPPs. Senior officials from NEPRA told the committee that in these agreements and payments following international standard is of paramount importance and more than one financial principles including cash flow and accounting principles come into action.

After in depth analysis of the lPPs agreements the subcommittee has concluded that 8 IPPs were analysed for an average duration of five years. Surprisingly, on an average, these IPPs were earning Rs 2.389 billion per year over and above the approved 15% profit by NEPRA. As per GoP Policy they were entitled for a profit of Rs 717 million per annum; however they were on average earning Rs 3,106 million per annum; hence making an illegal profit of 2.389 million per annum.

Terming it the biggest land mine laid by previous governments for PTI, Senator Nauman Wazir said that this extra should be recovered from the lPPs. lf dividend is paid then the same should be recovered from the shareholders. In case of non-compliance or non-recovery it is suggested that FIR to be lodged against shareholders for providing wrong data at the time of tariff determination and defrauding government of Pakistan. Assets of companies be confiscated/nationalized, said Nauman Wazir.

It was observed that extra tariff being charged by the IPPs over and above 15% approved by NEPRA. Nishat Power Limited is getting 12 percent, Nishar Chunian Power ltd 13 percent, Atlas Power Ltd, 5.3 percent and Hubco power Company Ltd is getting 15 percent over and above 15 percent approved by NEPRA. Future tariff to be reduced by all IPPs as per above percentage, senator Nauman Wazir added.

In the last 6 years, Nishat Power I Nishat Chunian was principally supposed to earn a profit of Rs 7. 02 billion based on the ROE 15 percent as per energy policy of GoP.’ However .the incorrect tariff approved by NEPRA, resultant in a windfall profits of Rs 37.65 billion, making them earn an illegal profit of Rs 30.63 billion in only six years. 

The future tariff be reduced by Rs. 1 to Rs 3 per unit depending on the IPPs. Almost all IPPs gave incorrect data at the time of tariff determination resulting in getting high tariff and subsequently illegal profits (Nishat Power/ Nishat Chunian 30 billion profit in last 6 years).

NEPRA failed to take action against the wrong data provided at the time of tariff determination despite the fact that the annual profit & loss account and balance sheets of IPPs are submitted to NEPRA each year which glaringly shows the erroneous tariff determination at the time of initial tariff award. As per agreement, the IPPs should have made profits of Rs 400 billion but they made 1400 billion profits. This is all visible on NEPRA website.

Senator Shahzaib Durrani said that NEPRA cannot provide profit to IPPs on profit. Profit can only be provided on investment, he added. Senator Nauman Wazir said that who was chairman NEPRA at the time of IPPs tariff and profit determination? Vice Chairman NEPRA, Bahadur Khan said that Lieutenant General Retd Saeed u Zafar was the chairman NEPRA. The money earned by the IPPs in ten years cannot be earned in drug business, senator Nauman Wazir added.

The Committee took strong notice of the absence of the Minister and Secretary and observed that the issue under discussion is very important matter relating to circular debt, economy crises and ideally the minister should have been here to respond to the sub-committee’s queries. The Committee put forward a list of 17 questions before the ministry and NEPRA and sought answers in the next meeting. Members of the Committee were if the view that this extensive exercise is aimed not on individual cases but on the overall policy and at coming up with lessons and guidelines for such agreements in future.