THE ECC decision to pay the first tranche of outstanding dues of one set of IPPs, and further delay the payments of unpaid bills of another is discriminatory given that the government has signed identical agreements revising the terms of their original power purchasing agreements. The government had renegotiated contracts with 47 IPPs set up between 1990 and 2013, which will potentially save it over Rs800bn in future payments to them and slow down fresh build-up in the power sector’s circular debt. In return, it had agreed to pay them their unpaid bills of Rs403bn in two instalments. But the first payment was delayed after NAB decided to investigate the 2002 IPPs. Now the ECC wants to clear the dues of the pre-2002 projects before the end of this month, holding back payment of the 2002 IPPs till the NAB inquiries are concluded. It may take years before NAB completes the probe, preventing both government and consumers from reaping the benefits of the deal, in addition to damaging Pakistan’s international image.
NAB’s intervention after the finalisation of the agreements is surprising, especially because the revisions in the PPAs provided for an independent arbitration under the Arbitration Submission Agreement option on alleged excess payment of Rs58bn made to the 2002 projects for an amicable resolution of the dispute between the IPPs and the government. There are quite a few theories about why NAB interfered with the process. But whatever the truth, the accountability authorities’ role of spoiler is only damaging the credibility of the government and strengthening perceptions that we are a country where contracts made with investors are not honoured and where economic policies are frequently altered with the change in political leadership. Hence, few foreign investors want to bring their capital here — and that too only when the government offers them a higher risk premium on their investments in the form of guaranteed returns as has been the case in the power sector. We have paid a heavy price for the shenanigans of successive governments. The current set-up has to pay the outstanding bills of the power producers one way or the other. If the accountability authority does not back off, the possibility of the affected IPPs using their right of international arbitration and invoking sovereign guarantees cannot be ruled out. This would harm prospects of future investment in this country and our relationship with multilaterals.
Published in Dawn, May 6th, 2021