International Pakistan (TIP) has informed the prime minister that electricity bills can be reduced by 50 per cent if corruption in independent power producers (IPPs) and distribution companies (Discos) is eliminated.
In a letter sent on Saturday to Javed Aslam, secretary to the prime minister, TIP chairman Suhail Muzaffar referred to the premier’s decision to constitute a committee to probe into overbilling, and stated that none of the members nominated in the committee performed duties which resulted in the current situation.
Headed by Finance Minister Ishaq Dar, the committee comprises Ministers Chaudhry Nisar Ali Khan, Shahid Khaqan Abbasi, Khawaja Asif and Khurram Dastgir Khan, and Water and Power Secretary Younus Dagha.
In support of his claim, the TIP chairman said the Securities and Exchange Commission of Pakistan (SECP) conducted an inquiry on a TIP complaint in 2012 into the fictitious loading of production cost by the KESC and independent power producers. Fertiliser manufacturers reported over-charging of Rs1,000 billion in ten years.
On Sept 24, 2012, he said, the SECP sent TIP an inquiry report which confirmed that IPPs and KESC were guilty of “fictitious loading” of cost in their accounts.
The TIP listed seven sources of fictitious loading costs and explained that furnace oil was procured with an additional three to five per cent mark-up paid in order to guarantee cover. The seller has back to back agreement to refund it to the procurers after retaining 0.5 per cent of the amount.
Other sources include exaggerated operation and maintenance (O&M) costs, monthly fees paid for technical services and consultancy costs, over-invoicing in the cost of material and goods procured, exaggerated input consumptions, sub-contracting of various operations at inflated costs, back to back arrangements with sub-contractors to refund 90 per cent of extra payments made and fictitious contracts and material and goods purchase billings.
The TIP said Nepra had failed to provide the records to the SECP since the last two years. However, the Independent Power Producers, in order to escape from facing the truth, and paying back over-claimed benefits of over Rs1,000 billion in ten years, filed a case in Islamabad High Court in August 2012 against the SECP mandate. The IHC, even without hearing the SECP, awarded a stay order against the commission, and that the stay order is still pending since last 27 months.
The TIP said that on June 16, 2013, it sent email messages to Ministers Khawaja Asif and Khurram Dastgir, informing them about the issue. Mr Asif was told by the TIP on June 28, 2013, that prior to releasing circular debt, the IPPs should allow detailed audit to be conducted by the SECP with assistance of the Auditor General of Pakistan, and withdraw the case in the IHC. The final payments should be subject to adjustments based on the audit report.
On August 3, 2013, Mr Asif was requested by the TIP — when the dispute of Asad Ali Shah, son of ex-chief minister of Sindh, and M. Saleem of special audit by Deloitte Pakistan of IPP’s circular debate came to its knowledge — to get the audit done by a joint team of the SECP and Auditor General Pakistan, based on the SECP’s August 2013 inquiry report.
The letter said that copies of TIP letters were also sent for action to the secretary of the prime minister, the director general of NAB, the director general of FIA, AGP and Supreme Court of Pakistan, Unfortunately no action had been taken in the last 15 months by any authority.
The TIP said the audit would prove the overcharging of tariff by 10 to 15 per cent.
The letter noted that the Prime Minister’s Inspection Commission in a letter to the heads of different distribution companies had observed that Discos had installed new meters which ran at least 30 to 35 per cent faster than the old ones and that the companies could adjust their speed according to their needs. The prime minister’s commission had warned chief executives of the companies over the issue and sought specific answers to pointed questions regarding the metering and overbilling issues.
It was reported by TIP that Wapda and KESC, the only two agencies who used the electric meters in millions per annum in Pakistan, had been instructing the meter manufacturers to provide faster meters to them.
The TIP informed the deputy chairman of Nepra and one of its members about the issue, on which the regulator replied that it was not Nepra’s duty to interfere in the matter.
Stating that correct bills on actual consumption would reduce the bills by 35 per cent, the TIP said fuel cost in tariff of power plants using furnace oil was over 70 per cent. Nepra should reduce all tariffs of power plants using furnace oil by 30 per cent, as international oil process had come down by more than 30 per cent. The overall impact of this reduction would be more than 10 per cent in bills of consumers.
by Amin Ahmed, dawn.com
Published in Dawn, November 2nd, 2014