ISLAMABAD: A Senate panel was informed on Wednesday that the government had formed a committee to negotiate with the Turkish firm, Karkey, the $800 million arbitration cost imposed by the International Centre for Settlement of Investment Disputes (ICSID) in the rental power projects (RPP) case.
National Accountability Bureau (NAB) Director General (operations) Zahir Shah informed a meeting of the Senate Standing Committee on Law and Justice that “the government has formed a high-powered committee comprising some federal secretaries and me to resolve the issue”.
The government is trying for an out-of-court settlement with Karkey for minimal penalty payouts and considers that a government-to-government engagement could deliver the results.
The Turkish ship-based energy firm, Karkey Karadeniz Elektrik Uretim (KKEU), was one of the 12 rental power companies that were awarded contracts by the Pakistan Peoples Party (PPP) government in 2009.
The ship was brought to Karachi Port in April 2011 to provide electricity to the national grid under the then government’s RPP policy to overcome the energy crisis. However, it failed to generate 231 megawatts as required under the agreement, although $9m was paid in advance as capacity charges to its management. The plant produced only 30-55MW and that too at a cost of Rs41 per unit, which was a serious breach of the contract. This led to a 50 per cent increase in the refund claim by the government, from $80m to $120m.
Mr Shah said that after filing a reference against Karkey, the company requested for a plea-bargain deal and was ready to pay $18m to NAB and promised that it would not go for international arbitration. However, some politicians had moved the Supreme Court and then chief justice Iftikhar Mohammad Chaudhry struck down the deal and insisted on recovering $120m from the firm. As a result, Karkey moved the ICSID in 2013 seeking compensation of $700m for the losses incurred by its vessels in terms of damage or depreciation after it was not allowed to leave Karachi Port for almost 16 months.
The NAB official said it had come to notice of the bureau that the Turkish firm had no power plant facility and it had purchased the ship (on which the power plant was installed) through advance payment given by the power division. He said one solution of the problem was that the government of Pakistan talked directly to the Turkish government and settled the matter.
Farooq Naek of the PPP told the meeting that he had not seen any example that the decision of international arbitrators had changed in the appeals, adding that Pakistan would have to pay the fine with interest (around $7m per year).
He said that though according to the ICSID verdict, no corruption had been committed in the award of the contract to Karkey in 2009, then water and power minister Raja Pervez Ashraf had been facing corruption references. “Could anyony explain why Pakistan has to pay huge amount of fine because of NAB’s mistakes?” he asked.
Earlier, the NAB team headed by its Deputy Chairman Imtiaz Tajwar gave a presentation to the committee on the bureau’s performance.
The meeting was informed that 1,185 references were pending in accountability courts as of total 24 accountability courts some were still vacant due to lack of judges.
The committee chairman Mohammad Javed Abbasi said it was a serious matter and urged the law ministry to resolve the issue by appointing judges so that backlog of cases could be removed.
Published in Dawn, January 25th, 2018