Major Corruption And Scam By Chinese Power Plants In CPEC Result In $630 Million Loss To Pakistan: Report

In an effort to explore the causes for the steep cost of electricity in Pakistan, the Imran Khan government has unearthed a scam of over $630 million involving power projects under the China-Pakistan Economic Corridor (CPEC).

This has led to the bloating of Pakistan's debt to $11 billion.

Pakistani media has reported that an inquiry committee constituted by Prime Minister Khan to examine the losses in the power sector has discovered corruption worth 100 billion Pakistani rupees by the Chinese private power producers.

The committee has recommended the government to force the producers to pay the amount for alleged malpractices.

Although the Profit Pakistan Today (PPT), which broke the news, did not mention the CPEC anywhere, Pakistan's former Ambassador Hussain Haqqani in an article in a US-based portal revealed that the scam was related to the Chinese businessmen contracted for the CPEC power projects.

The nine-member committee, as per PPT, submitted a unanimous 278-page long report, ''Committee for Power Sector Audit, Circular Debt Reservation, and Future Roadmap'', to Khan.

The report has attributed the losses incurred by the government due to the "violation of the Standard Operating Procedures (SOPs) that include the cost of the installation of Independent Power Producers (IPPs), government agreements, alleged embezzlement in fuel consumption, power tariff, guaranteed profit in dollars, and certain conditions of power purchase".

The committee had members from the offices of eight organisations,"which surprisingly included the premier spy agency, Inter-Services Intelligence (ISI) as well".

The documents related to more than 60 power plants were examined by the committee for over a period of eight months.

According to the report, the IPPs have been earning 50 to 70 per cent annual profits, as against the 15 per cent limit set by the National Electric Power Regulatory Authority (NEPRA).

The committee has claimed that the "IPPs owners showed the extra cost to get extra tariff at the time of the contract, with NEPRA failing to check the veracity of the cost. The cost of the power plant prepared by the companies was also accepted by the authorities".

The IPPs have obtained 350 billion Pakistani rupees since 1994 by altering the actual cost by Rs 2 to Rs 15 billion.

An "owner of a coal power plant offered a cost which was Rs 30 billion more than the actual cost in order to obtain higher power tariff".

The IPPs owners, as per the committee, earned "unjust" profits in fuel consumption whereas NEPRA never gauged the efficiency of the consumption.

The owners had also resisted signing an agreement for a regular audit, the report said.

The government and power consumers are forced to pay billions of rupees annually even if the power plants are closed or produce low electricity due to cut in power demand, it added.

The committee has said that the government is bound to pay 900 billion Pakistani rupees to power plants under the head capacity payments while it will have to pay a capacity payment of 1500 billion Pakistani rupees by 2025 according to the agreement.

Though the guaranteed profit should not be for more than four to five years, the government and NEPRA has granted guaranteed profit for 25 years, the report claimed.

"These lop-sided agreements caused unbearable loss to the exchequer. The prevalent practice also led to a hike in power tariffs," the report said.

The story has been published via a syndicated feed, only the headline has been changed