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SC cancels lease of Lakhra power plant

Updated August 22, 2013

ISLAMABAD, Aug 21: The Supreme Court set aside on Wednesday a Musharraf-era (2006) leasehold agreement between Wapda and the Associated Group (AG) to run a sick power plant for 20 years and ordered the government to conduct a thorough inquiry to fix criminal responsibility on the beneficiaries.

“The transaction between AG and Wapda is not sustainable being non-transparent and also suffers from irregularities, illegalities, omissions and commissions as well as violates the relevant rules and precedents set forth by the superior courts,” a three-judge bench concluded after a three-day hearing of an appeal by the Habibullah Energy Limited (HEL).

The HEL had filed the appeal against a December 2007 order of the Sindh High Court (SHC) to hand over the fluidised bed combustion coal-fired Lakhra power plant to the AG.

Through Advocate Hassan Aurengzeb, the HEL had asked for striking down the grant of lease of the plant to the group owned by Iqbal Z. Ahmad.

The cost of the litigation would be borne by Wapda, said the short order. Detailed reasons will be given later.

The 150MW plant, established in 1995, is situated about 50km from Hyderabad at Khanote village, on the right bank of the Indus. It comprises three 50MW units.

The plant was designed by Chinese experts on the fluidised bed combustion technology, which was introduced in the country for using lignite coal as fuel for the Lakhra field.

On Tuesday, the Supreme Court had expressed disappointment after learning that the PML-N government intended to put on sale the plant despite the matter being sub judice before it.

Acting Water and Power Secretary Saifullah Chattha assured the bench on Wednesday that the government would not privatise the plant till the dispute was settled by the court.

“While setting aside the transaction we direct the federal government to conduct an inquiry / probe to fix the civil and criminal liability upon the persons / beneficiaries in accordance with the law,” the order said.

The lease was awarded to the AG after then president Pervez Musharraf intervened and ordered his chief of staff retired Lt Gen Hamid Javed to hold a meeting at the presidency with the AG and HEL to arrive at a consensus on July 13, 2006.

The court order came after Additional Attorney General Shah Khawar said the government was inclined to revisiting the entire process of the agreement and intended to hold an inquiry against those responsible for the illegal deal.

He said was under instructions from the government to plead before the court that the process of leasing of the Lakhra power plant lacked transparency and the entire process of the bidding violated the Public Procurement Regulatory Authority rules.

The AG was not a pre-qualified bidder, he said, adding that the role of the Water and Power Development Authority was totally irrelevant since the generation companies had become autonomous after the incorporation of the Genco Holding Company in 2011 when four companies were set up and Lakhra was one of them.

The court held that the Sept 11, 2006, lease for 20 years of the Lakhra power station Genco-IV, followed by the Dec 15, 2007, power purchase agreement (PPA) had been entered into in a non-transparent manner while doing away with the PPRA rules and an open opportunity to interested parties to participate in the competition for acquiring the leasehold rights.

Advocate Shahid Hamid, representing the Wapda chairman, said he fully endorsed the deal and considered it as good as possible and, therefore, it should be maintained.

He said the deal, as well as the PPA, were in the manifest public interest.

But if the court came to the conclusion that the deviation (by not advertising the bidding process) should not be condoned then it should order a fresh process by properly advertising the entire process and whosoever offered a better bid should be handed over the plant, he said.

He also highlighted that if privatised in the present state, the plant would not fetch a good price.

Advocate Waseem Sajjad, representing the AG, suggested that the judiciary should exercise restrain against the backdrop of the electricity crisis and economic issues and that the court should go out of the ordinary in the ‘national interest’.