ISLAMABAD: Water and Power Minister Khawaja Asif has accepted responsibility for three months’ delay in making the controversial Nandipur Power Project operational but declined to release a report of the Auditor General of Pakistan on the subject until it was cleared by the prime minister.
Addressing a news conference he had called to explain the official position on the controversy and AGP’s report on Wednesday, the minister did not agree with a questioner that AGP’s origin from Sialkot, close association with the finance minister, his role in the project’s cost approvals as special finance secretary, release of funds and sanctioning of sovereign guarantees could have compromised an independent audit assessment.
He said he did not even know that the AGP appointed by the PML-N hailed from Sialkot. The AGP might have processed several projects during his career. Khawaja Asif also did not agree that he had been involved in any blame-game with the Punjab chief minister on the subject a couple of months ago.
He said when the PML-N government came to power the Nandipur project had already achieved 65 per cent progress with an expenditure of Rs32 billion.
The minister, however, did not respond when asked why the current government had taken around 28 months to operationalise the project with only 35pc outstanding works while similar projects were normally completed in a maximum of 30 months.
He claimed the AGP had vindicated his ministry’s position that the project execution was within the approved cost of Rs58.416bn and that no evidence of corruption or kickbacks was found. However, he said the AGP had raised some questions which would be responded to. He said the AGP’s report would be made public when seen by the prime minister.
Khawaja Asif said the actual expenditure on the project stood at Rs51bn as of now and Rs7.5bn was still outstanding. The project standards have been substantiated by reliability test runs. Nepra had specified output of 411MW and efficiency of 44pc but the plant generated 430MW at 44.94pc efficiency.
He admitted that the fuel oil treatment plant (FOTP) was of less than the required capacity and this had also been accepted by the contractor who had agreed to remove the shortcoming.
The minister said the project contract was signed in 2008 at a cost of Rs20.075bn which was higher than the approved cost of Rs15.5bn.
The finance ministry issued guarantees in October 2009, which were a condition for getting foreign loans, for the project started in October 2008 and to be completed in April 2011. The guarantees were to become effective after legal opinion of the law ministry. The opinion was issued on October 19, 2011, after the August 31, 2011, date of loan expiry. This is the actual cause of all the problems attached to the Nandipur project.
Khawaja Asif said he had estimated a loss of Rs113bn per year when he took up the case before the Supreme Court during the PPP government and a judicial commission headed by retired Justice Rahmat Ali Jaffery appointed by the court adopted his estimates in its findings.
He said the judicial commission had held the ministry of law responsible for the two-year delay and resultant loss of Rs226bn.
He said even the revised cost of Rs58bn had been estimated by the PPP government in 2012 which was approved by the present government in July 2013 after due diligence carried out by the Planning Commission.
The minister said the major cost variations occurred because of the award of work at higher cost than initial PC1 estimates, inflation, exchange rate fluctuation and interest during construction. The only main cost component attributable to the restart of the project, was an amount of $67m out of which Rs5.445bn was paid to the contractor for remobilisation, repairs and replacement of damaged equipment.
He said the AGP report held the appointment of Nandipur project’s managing director as illegal because there was no approved position of MD, but claimed the company’s board had the authority to create such posts.
He said that according to the AGP the project was given to a blacklisted company – Dongfang – but it was blacklisted in June 2013 by the Railways when the Nandipur contract had already been signed.
He said the under-capacity FOTP was a serious issue and the report had rightly highlighted this aspect. The contractor has been made to undertake the rectification and he has to install two additional units to make up for the deficiency. The O&M contract also attracted maximum criticism because it caused the plant to become non-operational. He said the ministry ordered outsourcing of the O&M to ensure guaranteed plant availability and output compared.
The international bidding led to selection of a Malaysian firm which was opposed by the board of directors because of post-bid changes and transparency. In April this year, the board ordered hiring of an EPC contractor to run the plant and train local manpower, but this was not done by the Nandipur project management and the plant became non-functional on August 10.
The prime minister, therefore, directed the water and power ministry to change the management and with the technical assistance from the General Electric and trained manpower from another private firm, the plant has been running since October 24.
Published in Dawn, November 19th, 2015