ECC defers first installment payment to IPPs

Aftab Ahmed

Economic Coordination Committee (ECC) on Wednesday again deferred release of first tranche of payment to Independent Power Producers (IPPs) under a settlement deal.

ECC held a meeting on Wednesday.

Sources said that National Accountability Bureau (NAB) is already investigating into a deal with IPPs.This may be reason that ECC deferred it, sources said.

Earlier, Power division had moved a summary to ECC for several times but the economic decision making body stayed away from considering it.

It may grant approval IPPs-first installment of 40 per cent under payment mechanism. Under a deal, government is to pay Rs 403 billion to IPPs. Nepra has already granted approval to reduce the rate of return of IPPs.

Earlier, the Power division has suggested the economic coordination committee to refer a matter of pocketing billions of rupees by Independent Power Producers (IPPs) to the Federal Board of Revenue (FBR) on account of tax they have collected from the contractors but did not deposit in national exchequer.

The IPPs have been collecting 4 percent tax but have not deposited in the national exchequer.

The power division has sought approval from the economic coordination committee for approval.

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It said that Federal Board of Revenue (FBR) may review the matter of taxation at the rate of 4% of the relevant payment and determine whether the allegation is based on facts and if any recoveries are due to be made from the related Payments, to all IPPs under Power Policy 2002, which have signed Agreement.

The power division informed the tariff of IPPs under Power policy 1994 was based on any change in assumptions especially with reference to the taxation of contractors at the rate of 4% of the relevant payment.

There are allegations IPPs had not deposited tax to FBR in certain cases.

It was not possible for the Committee to review this matter in the absence of data from IPPs, contractors or tax authorities, therefore, the GoP is to look into this matter.

After approval of the report by the CCoE followed by the ratification of the Federal Cabinet, the matter was referred by the Power Division to the Federal Board of Revenue (FBR) through communications. No response has been received from FBR so far.

The Federal Cabinet constituted a Negotiation Committee to negotiate the tariff and various other matters with IPPs. The Negotiation Committee signed MOUs with IPPs and cabinet committee on energy considered and approved it. The Cabinet ratified it later.

Subsequently, government had formed an Implementation Committee to convert the MOUs into binding agreements.

The Cabinet Committee on Energy (CCoE) and ECC considered the report by the implementation Committee, mandated to convert MOUs into binding agreements, and approve the payment mechanism and agreements with IPPs in meetings held on 8th February 2021.

The said decisions were ratified by the Cabinet on 9th February 2021(Annex-III).Pursuant to the Cabinet’s approval, agreements with 32 IPPs have been signed on 11h,12th,16th & 19 February 2021.

As per the payment mechanism under the agreements, government is to pay the first installment of outstanding payables of IPPs within 30 days of the signing of the agreement for IPPs under the pre-NEPRA regime and after tariff determination for IPPs under the NEPRA regime.

 NEPRA has held a hearing on the matter on March 3, 2021. Payment to these IPPs will become due upon notification of the revised tariffs.

The Inquiry committee on power sector audit had pointed out issue of excess profitability of 2002 Power Policy IPPs in the report and future roadmap.

Subsequently Committee for Negotiations with Independent Power Producers notified 3rd June,2020,signed MoUs with the said IPPs containing the following clause:

＂In order to assess if IPPs have made any excess profits, the power division will submit reconciled numbers between the Committee and the IPPs to NEPRA. NEPRA shall hear and decide this matter in accordance with the Power policy, tariff determinations, and PPAs and provide for a mechanism for recoveries where applicable.”

The power division has initialed draft Agreement with  12 IPPs under Power Policy 2002.

NAB investigates corruption into Mansha’s power plant

National Accountability Bureau (NAB) has informed that the Bureau is conducting an investigation on the allegations of corruption and corrupt practices against owners/management of Nishat Chunian Power Limited(one of the Power Policy 2002 IPPs), officers/officials of NEPRA, and officers ‘officials of CPPA and others. Power division further informed that NAB had converted inquiry into investigation. NAB has asked for provision of record and present status of MOU/agreement signed and final negotiations between IPPs and GoP under section 19 National Accountability Ordinance 1999.

Accordingly, the power division has provided relevant record to NAB Lahore. Subsequently, Power Division requested NAB to examine the process negotiation and agreements with the IPPs for validation.

NAB has informed that they have received the said agreements but have neither informed that the same has been examined nor have validated these, stating that execution of the contracts by any Ministry fall in the ambit and purview of Section 9 of NAO.

NAB is apparently conducting investigations into the issue of excess profitability and this matter relates to IPPs of Power Policy 2002, therefore, power division proposed to withhold payment till the conclusion of NAB investigations.

The ministry submitted a summary to ECC on February 17, 2021 on the same subject. ECC considered the summary  deferred it till the next meeting.

The power division placed a summary again on the agenda of ECC on March 10, 2021, and it deferred due to a paucity of time. Since that time, it has not brought on the agenda of ECC after that date, so far.

In view of these  facts, power division placed the matter before ECC for consideration and requested to direct Federal Board of Revenue (FBR) to review the matter of taxation at the rate of 4% of the relevant payment. It also requested that FBR should determine where the allegation is correct and if any recoveries are due from the all IPPs under Power Policy 2002, which have signed Agreement.

It proposed that pursuant to MOUs, payment may be withheld till the conclusion of the NAB investigation.

The government may suspend the process of signing Arbitration Submission Agreements with IPPs 2002 Power Policy, till the conclusion of the NAB investigation and to take any other action ancillary thereto which may assist NAB investigation.