ISLAMABAD: The Supreme Court has declined a federal government request for facilitating the settlement of almost Rs300 billion worth of financial claims and counter-claims among various public sector entities and K-Electric.

Informed sources told Dawn that the government had recently requested the apex court to set some guiding principles for settlement or arbitration of huge build up of payables and receivables from the privatised KE. Concise statements of payables and receivables were also presented to apex court in chambers.

In this regard, a battery of federal ministers, relevant secretaries and legal minds besides the chief executives of public and private sector entities had also called on the Chief Justice of Pakistan Gulzar Ahmed for a briefing on the sensitivities of the growing circular debt involving KE, National Transmission & Despatch Company (NTDC), Sui Southern Gas Company Ltd (SSGCL), Karachi Water & Sewerage Board (KWSB) and the federal government.

A federal minister told the court that top government officials were reluctant to take initiative for settlement of controversial amounts because of fears of the National Accountability Bureau (NAB). A number of federal secretaries and chief executives of companies over the past 5-6 years have declined to be drawn in controversies relating to settlement or write-offs for such huge financial adjustments.

Govt sought settlement of almost Rs300 billion worth of financial claims and counter-claims

As a result, not only the prospective transfer of KE’s majority shares to Shanghai Electric had been stalled for years, the troubled integrated public utility was not doing enough for improvement of its system in the country’s largest metropolitan, affecting the consumers in peak summers. The issue was also hampering the signing of fresh agreements for power and gas supply to KE that could lead to 800-900MW shortage in Karachi in coming summers.

At least two official sources present during the meeting confirmed requesting anonymity that the chief justice was not inclined to be drawn in commercial matters of purely executive nature. The delegation was told that the top officials of the federal ministries and executives of relevant companies had been in the service of Pakistan for decades and as elected representatives of the people the ministers should settle the matters on merit instead of shunning their responsibility and should not expect the court to take decisions on their behalf.

These sources said Minister for Planning and Development Asad Umar who also heads the Cabinet Committee on Energy (CCoE) is expected to call a meeting of the heads of relevant agencies and companies to ensure that ongoing projects for Karachi get timely implementation and find a way out for bilateral settlement of financial issues.

At the heart of problem are Rs272bn outstanding dues the NTDC and SSGCL claim against the KE on account of past electricity and gas supplies. Both companies are reluctant to sign fresh supply agreements with KE unless these dues are cleared. Of this, SSGCL has claim of Rs122bn against KE that it says had developed over the years despite no formal gas supply agreement. Also, the NTDC management wants clearance of its Rs150bn before signing the PPA for additional power supply.

The KE on the other hand claims about Rs234bn against the government and its agencies on gross payable basis and expects about Rs80bn net payments from the public sector provided all payables and receivables are settled on principal payment basis ie if both sides give up mark-up and settle for principal dues. Some of these amounts are, however, just claims at this stage.

Published in Dawn, January 20th, 2021