Rs207bn power project awarded without bids

[Naveed Yaseen]

http://www.jang.com.pk/jang/sep2009-dail...9/main.htm

By Ansar Abbasi
ISLAMABAD: In violation of the government’s policy and without going through an open bidding process in mega projects, the government first signed an MoU and then issued a Letter of Interest (LoI) for Rs207 billion ($2.5 billion) 1,050 MW Kohala hydropower project to a Chinese company, it is learnt.

The China International Water & Electric Corporation (CWE) is now seeking an extension in the time for preparing the feasibility study and even waivers from the ECC and the cabinet approvals are being sought to give a legal cover to what has been done irregularly and illegally.

Sources said without any prior approval of the federal cabinet or the prime minister, an MoU was signed in October 2008 between the government of Pakistan and the CWC in Beijing during President Asif Zardari’s visit to China.

It is interesting to note that the then-water and power secretary Ismail Qureshi, who was part of the president’s entourage, refused to sign the MoU despite being the most relevant person representing Pakistan.

A source said when Qureshi was approached to sign the MoU, he said since the government’s procedure that includes the prime minister and the cabinet’s approval and vetting by the law ministry was not followed so he would not be part of any such deal.

Ultimately, Pakistan’s ambassador to China Masood Khan signed the MoU on behalf of the ministry of water and power, government of Pakistan.

Ismail Qureshi when approached refused to talk on the subject; however, a senior official of the water and power ministry confirmed that the document did not contain Qureshi’s signature.

Water and Power Secretary Shaid Rafi when contacted said he is not fully aware of all the facts of the case that he promised to share with The News by Wednesday. He, however, explained at times the government, in public interest, does avoid set procedures and policies but later such relaxations are ratified by the same forum that is competent to make the policies.

Private Power and Infrastructure Board (PPIB) Managing-Director Fayyaz Elahi agreed the approved procedures have not been followed in this case but said the PPIB has already forwarded a written request to the water and power ministry to get the MoU ratified, besides getting a waiver of policy from the cabinet and the ECC to get the project going.

Elahi, however, said the LoI issued under his signature for approximately 1,100 MW Kohala hydropower project is only meant for the feasibility study of the project. Interestingly early last year, the government had decided this major run-of-the-river power project would remain in the public sector and would be pursued by Wapda that engaged consultants to prepare the feasibility of the project located on River Jhelum at Kohala.

Once completed it would have the capacity to produce 1,050 MW of electricity and the estimates say the annual production of energy would be six billion units. Cost of the project is estimated at $2.5 billion.

Interestingly, while the detailed engineering feasibility of the project was being finalised by Wapda through foreign consultants, the MoU was suddenly signed in China with the CWE during President Asif Zardari’s visit. The CWE had assured that it would even finance the project.

Later on January 15, 2009, the PPIB issued the LoI of the project to CWE but without any international bidding.

The operative part of the LoI, a copy of which is available with The News, says: “In the light of the Memorandum of Understanding (MoU) signed in October 2008 between the ministry of water and power, government of Pakistan and China International Water & Electric Corporation, CWE (the main sponsor) in Beijing during the president’s visit to China, and subsequent submission of Performance Guarantee No. LG-08090005 dated January 14, 2009, the government of Pakistan (GoP) has, in principle, given a go-ahead to implement 1,100 MW Kohala hydropower project (the “Project”), to be located in district Muzaffarabad, Azad Jammu & Kashmir, in the private sector under policy for power generation projects, 2002 (the “2002 Power Policy”).

“Accordingly, you are required to review, update (if required) and own the feasibility study for the project, carried out by the consultants appointed by Water and Power Development Authority (Wapda), at no risk and cost to, and without any obligation on the part of, the GoP and its agencies, and submit the same to GoP within nine months from the effectiveness of this LoI. Furthermore, before the issuance of a Letter of Support (LoS) under the 2002 Power Policy, the audited cost of the feasibility study shall be reimbursed by the major sponsor to Wapda. The LoS will be issued after approval of the project by the GOP...”

The validity of this LoI is nine months and the CWE is required to complete the review and updating of the feasibility study for the project within these nine months, which expires next month. But the LoI issued also contains a provision that in case of delay in completion of the feasibility report within nine months, a one-time extension may be granted to a maximum of 180 days, as per provisions of the 2002 power policy, provided that the GOP is satisfied that the delay was beyond the reasonable control of the sponsors.

Sources in the PPIB said the LoI was issued by the board despite serious procedural and legal lapses following the insistence of some senior authorities in the government.

But PPIB chief Fayyaz Elahi said he was supposed to pursue the matter when the MoU was signed in the presence of the country’s head of the state. He, however, said he has sought the ratification of the MoU, besides seeking waiver of the policy to further pursue the project.

“It is now up to the cabinet and the ECC to decide,” he said, adding if the cabinet and the ECC do not approve the case, he would not pursue it anymore. Sources, however, said avoiding transparent procedures and without inviting open international bidding of such mega projects would raise many eyebrows.

http://www.thenews.com.pk/top_story_detail.asp?Id=24556