SC pulls the plug on Raja’s RPPs

Declaring all rental power plants (RPPs) contracts illegal and non-transparent, the Supreme Court on Friday directed the National Accountability Bureau (NAB) chairman to proceed against all the persons involved in corruption, including former minister for water and power Raja Pervez Ashraf, in accordance with the law.
The court also directed NAB to submit fortnightly progress reports pertaining to actions against the persons involved in corruption in the case to the Registrar Office for the judges’ perusal. A two-member bench of Chief Justice Iftikhar Muhammad Chaudhry and Justice Khilji Arif Hussain announced operative part of the 90- page verdict and held that RPPs mode of electricity generation proved a total failure and was incapable of filling the electricity demand and supply gap on a short term basis. The judgment said that during the award of RPPs contracts, PPRA Rules were violated and principle of transparency and open competition was not followed. The court ordered that the contracts of RPPs be rescinded forthwith and all the persons responsible for the same were liable to be dealt with for civil and criminal action in accordance with the law.
The court had reserved its judgment on December, 14, 2011 on the petitions of federal minister for housing Makhdoom Syed Faisal Saleh Hayat and PML-N leader Khawaja Asif in the RPP case. During adjudication of the case, in pursuance of the court orders from time to time, a sum of Rs 8.689 billion was paid back to the government by different RPPs. This amount was paid to them as mobilisation advance, however, proceeding for recovery of interest amounting to Rs 445.496 million from two RPPs Young Gen and Reshma were still pending.
While issuing directives to the NAB chairman, the CJ said all government functionaries, including the ministers for water and power holding charge in 2006 and onward and from 2008 to onward, during whose tenure the RPPs were approved and the finance secretary holding the charge when mobilization advance rate was increased from 7 to 14 percent, were liable to be dealt with under the NAB Ordinance, 1999, by the NAB.
“All functionaries of PEPCO, GENCOs, PPIB and NEPRA along with sponsors (successful bidders) who had derived financial benefits from the RPPs contracts are, prima facie, involved in corruption and corrupt practices, therefore, they are also liable for the civil and criminal action,” said the CJ in his directions to the NAB chairman.The chief justice said in the judgment that Bhikki RPP was paid Rs 8,698 million against 811.605MW of electricity, whereas Sharaqpur RPP was paid Rs 13,941.82 million against 1520.420MW of electricity.
He added that as regards the RPPs set up since 2008, out of nine RPPs to whom advance payment were made , six, including Techno Sahiwal, Guddu, Reshma, Young Gen, Naudero-II and Techno Samundari had returned the advance payments in pursuance of court orders. However, mobilization advance payment made to Karkey, Gulf and Naudero-I had not been returned so far.
It was categorically said in the judgment, “Despite down payment of billions of rupees to the RPPs, Karkey is generating 48.33MW against a capacity of 231MW and Naudero-I is generating 9.16MW against a capacity of 51MW; whereas, Gulf is generating 50.08MW against a capacity of 62 MW.”
It added that Pakistan Power Resources (Piranghaib, Multan) did not generate electricity at all, although down payment of $14.58 million was made to it, which had not been returned.
The judgment added, “Though RPP Reshma has returned the down payment, yet it is still functioning and generating 15MW only against capacity of 201.3 MW”.
The verdict disclosed that per unit cost of electricity produced by the RPPs was on a very high side, as Karkey was ranging from Rs 35 to Rs 50, Gulf Rs 18 to Rs 19, Naudero-I Rs 12 to Rs 19, adding that such rates were a blunt violation of ECC decision of September 10, 2008 which emphasized on making efforts for lower tariff through RPPs than IPPs on the similar technology for the first ten years.
“All the RPPs are collectively generating just 120MW of electricity, adding huge amount has been paid to Karkey, Gulf and Naudero-I and if they are allowed to continue for the left over term, further huge amounts would be paid to them at expense of the public exchequer with no corresponding benefit to the consumers,” the judgment said.
It said, “Prior to the introduction of RPPs, the system of generation of electricity under the control and management of Ministry of Water & Power, WAPDA, PEPCO, GENCOs, etc., had sufficient potential to produce more electricity, but instead of taking curative steps for its improvement, including clearance of circular debt of the IPPs or resorting to other means of generation of electricity, billions of rupees were spent on Bhikki and Sharqpur RPPs, which proved a complete failure because the object could not be achieved as the shortage of electricity persistently continued, and yet more RPPs were installed,” the verdict said. The court ruled that the federal government, WAPDA, PEPCO AND GENCO had failed to control pilferage of electricity from the system because of bad governance and failure of the relevant authorities to enforce the writ of the government.
“Therefore, the government is required to improve the existing system of generation and transmission of electricity, by taking all necessary steps, including clearing of circular debt, et., so that electricity can be generated to the maximum capacity,” the verdict said.
Later in the day, Minister for Water and Power Syed Naveed Qamar said that the National Transmission Despatch Company (NTDC) would release notices of termination of contracts to all RPPs in line with the SC order.