Khawaja Asif says Inquiry commission has confirmed govt’s stance on Nandipur project cost; says report will be made public later
The government on Wednesday announced getting a clean chit from the Auditor General of Pakistan (AGP), which endorsed almost all of the official facts and figures on the Nandipur Power Project fiasco.
Addressing a news conference with the Minister for Information Pervaiz Rashid, Minister for Water and Power Khawaja Asif said that by and large the report endorses all our figures and added that the media frenzy over the issue had been unfounded.
Prime Minister Nawaz Sharif, in September had ordered the AGP to hold an inquiry on the 425MW Nandipur Power Plant that failed to perform at the optimal level after the commercial operation date (COD) in July and during the fourteen-day test run in August this year.
The PML-N government, instead of tasking a neutral and independent institution such as the Asian Development Bank (ADB), as the PPP government had done in the rental power case, asked a handpicked AGP Rana Asad Amin to handle the inquiry.
Amin was serving as Advisor to the Ministry of Finance for the last two years after retiring as Finance Division special secretary. He was considered a very close confidante of the Finance Minister Ishaq Dar, which led to his getting the coveted post of AGP.
However, Khawaja Asif refuted suggestions from media that ‘a friendly umpire’ had been instrumental in getting the clean chit. “Rana Asad Amin is from Sialkot. That’s news for me,” he said when told that they both belong to the same area. He said the fact was that the Nandipur plant had been functional since October 24 and would operate at optimal level soon.
The minister said that not only NEPRA but now the audit report had certified that claims of the project cost being Rs 84 billion are false. The project is well within the approved cost of Rs 58.416 billion. As of today the actual expenditure on the project stands at Rs 51 billion.
Project standards are substantiated by reliability test runs. For the purpose NEPRA estimated an output of 411MW and efficiency of 44 per cent. The plant, however, clocked 430MW output at an efficiency of 44.94 per cent.
Since the first turbine’s inauguration in May 2014 to COD on July 23, the plant generated around 478.11 million kwh worth Rs 5.6 billion, the minister said. This, however, was commissioning and testing phase. Yes it is true that furnace oil treatment plant (FOTP) is under capacity. This has also been admitted by the contractor who has been made to agree to remove the shortcoming, he said.
Asif said that an independent board of directors (BoD) and management was hired for the project, it was the responsibility of the management to address the concerns shown by the BoD regarding higher operation and management bid cost.
A statement issued by Ministry of Water and Power said that the report says that EPC contract was signed on January 28, 2008 at a cost of $329 million which at that time converted to Rs 20,075 million (@ Rs. 61 per USD). This is an established fact. However, another important fact is that it was higher than EPC cost of Rs 15,479 million as given in the first PC-I. So at the time of signing of EPC contract in 2008, the project had already gone above the initial PC 1 estimates.
Work on the project commenced in October 2008 with completion date of April 2011. Ministry of Finance issued guarantees in October 2009 which were a condition to avail foreign loans. However, these guarantees were to become effective after legal opinion of the Ministry of Law. This opinion was issued on October 19, 2011 after the loan expiry date of August 31,-2011. This, he said, is the actual cause for all the problems attached to Nandipur project.
Shipments started to be blocked at ports, contractor started to demobilise and finally served the termination notice on June 17, 2012. This delay derailed the project which otherwise could have been completed in April 2011, the minister said.
The Supreme Court of Pakistan constituted a commission on October 26, 2011 to look into issues of the Nandipur project and the commission put the responsibility squarely on the authorities of the Ministry of Law, which the Court said was responsible for delays and resultant loss of billions of rupees.
“This government came into power in May 2013 and for this specific project, had options to abandon the project or resume the work as per Supreme Court directives. In case of abandonment of the project there would have been a total estimated loss of $379 million while in case of resumption of work, the project could be made useful with some additional cost,” the minister explained.
“The government opted for the second option as an expenditure of Rs 31.8 billion had already been incurred. This has also been certified by the audit report,” Asif said.
The minister said that the government had also been blamed that it inflated the cost to Rs 58 billion in the revised PC-I. He said that the report had shown that the PC-I was prepared in 2012 and presented to Planning commission on January 16, 2013. CDWP sent its recommendations on April 8, 2013.
“This sequence itself clarifies the position,” the minister said. “However, the final approval was given by ECNEC on July 4, 2013 and this was again done after a due diligence carried out by the Planning Commission regarding the revised costing of the project.”
One important aspect is that major cost variations occurred due to award of work at higher cost than initial PC-1 estimates, inflation, exchange rate fluctuation, and interest during construction. All these are directly related to delays in the execution of project, the minister said.
The only main cost component attributable to restart of the project is an amount of $67 million out of which Rs 5,445 million was paid to contractor for remobilization and repairs/replacement of damaged equipment.
The audit report has said that the appointment of Nandipur MD was illegal as there was no approved position of MD. But, the minister said that the company BOD had the authority to create such posts.
He said the commission’s report mentioned that the company was blacklisted after award of the contract and not before as claimed by certain quarters.
The minister said the plant would be converted to liquefied natural gas (LNG) to solve the issue of fuel treatment plant. The cost of production would decrease by two per cent to Rs 10 per unit after its conversion to LNG.
He said the plant would use 100 mcf LNG to produce electricity at an affordable rate.
Asif said that the company would bear the cost for enhancing the capacity of the treatment plant.
Replying to a question, he said net hydel profit would be paid to Khyber Pakhtunkhwa soon as Prime Minister Nawaz Sharif had directed to resolve the issue.
To a question, he said the government was in contact with the workers of Water and Power Development Authority (WAPDA), who were on strike, to resolve the issue amicably.
The minister said that broadly, the report had vindicated the position of the government and the ministry on key issues being repeatedly highlighted in media about the Nandipur project.
“There is no indication of any wrong doing or embezzlement. The O and M issue was mismanaged. But now corrective measures have been taken,” the minister said, and added that an international competitive bidding would shortly be under taken to outsource the O and M in a transparent manner.