Govt extends 14% advance to RPPs despite ADB request to wait for it's validation

[Naveed Yaseen]

By Khalid Mustafa
ISLAMABAD: In a new development, the government has scrapped the ridiculous principle of “first come, first served” with regard to extending the 14 per cent mobilisation advance of the contract value to the rental power plants. Now, the recipient rental project will be chosen on the basis of the importance of the plant with regard to the place where it is proposed to be installed, cost effectiveness and equipment efficiency.

This pragmatic revision, however, was not voluntary but forced by the Asian Development Bank (ADB), which is currently conducting the energy audit and also working as third party validation, to determine the efficiency etc. of rental power plants. The ADB has also shown its readiness to extend the counter guarantees for L/C to the RPPs after due validation process, it was learnt.

Meanwhile, the Finance Ministry has displayed inexplicable alacrity in giving away millions of dollars as mobilisation advances to companies with no power sector experience in violation of the laid down criteria.

When contacted, Finance Minister Shaukat Tarin confirmed that the ADB wanted the government to first allow those rental power plants which were direly needed. He said the Bank wanted the government scrap the “first come, first served” principle to this effect.

“We will honour the recommendations of the ADB and the cabinet will also look into the recommendations of the ADB which it will furnish soon as a third party validation after going through the Implementation Agreement (IA) of 14 rental power plants of 2,250 MW,” he said.

However, there are strong indications, official sources said, that some of the rental power companies might drag the government into the international arbitration court for erasing the principle of “first come, first served”.

“The rental power giants are of the view that this is sheer injustice as the government should honour the agreements which were inked earlier, rather than picking and choosing the project under the new mechanism,” the source added.

The sources said that the ADB had also shown its inclination to extend the counter guarantee for L/Cs to facilitate the rental power plants, but only to those which would be scrutinised after the validation process. “The bank is currently reviewing all rental power projects,” The News was told.

It is pertinent to mention that the Finance Ministry, prior to the completion of the ongoing third party validation process, has already extended 14 per cent mobilisation advance to the tune of $74.402 million to five rental power plants having 706 MW capacity. This hasty act by itself warrants a thorough inquiry. According to the original rental policy framework, the sources said, the companies participating in international competitive bidding had to have requisite experience, but in the case of awarding 14 per cent advance to five rental power plants, the basic criteria of required experience was violated.

The five rental power plants, which have been given 14 per cent mobilisation advance include Gulf (81 MW), Reshma Power Rental Project (220 MW), the Ruba Energy Rental (170 MW), the Sialkot Rental Power Project (85 MW) and Sahuwal (150 MW).

Of the aforementioned projects, the sources said, Gulf and Sialkot were both being set up under legally distinct companies, which were owned by one Haseeb Khan of Sialkot and there was no history of power sector experience. Reshma and Ruba are being set up, again, under legally distinct companies which are owned by the Ruba Group, with Chinese backing. Sahuwal is being set up by the Techno Engineering Services which, considered to be a sound construction company that built the White Oil Pipeline, has no direct experience in the power sector.

http://www.thenews.com.pk/top_story_detail.asp?Id=25084