LAHORE, Oct 8: Pakistan shall have to pay billions of dollars as compensation to independent power producers if contracts with them were set aside, even if by a court of law and for being unjust and unconscionable, the Wapda counsel told a three-member bench of the Lahore High Court on Monday.

Advocate Tariq Kamal Kazi was replying to a court query about the legal consequence of acceptance of two writ petitions against the contracts with IPPs.

“The remedy will be worse than the disease!” the bench comprising Justices Amir Alam Khan, Karamat Nazir Bhandari and Mian Hamid Farooq surmized.

The bench is hearing two petitions filed by the Central Hydro-Electric Union and a public interest litigant for cancellation of contracts with the IPPs for being oppressive and one-sided.

The petitioners say that the contracts were the outcome of kickbacks and they pawned the interests of the people of Pakistan for the benefit of a few.

Appearing for the petitioners, advocates Maqbool Sadiq Malik, Shakeelur Rehman Khan and Hania submitted that the then Wapda member for power resigned in protest against the contracts in 1994. The court should only examine whether the contracts are just and equitable and in public interest and pronounce its verdict, they said.

Mr Kazi submitted that private investors had to be inducted in the power generation sector because of electricity shortage in early nineties and also because of the projected growth in demand, which did not occur.

Hydel power plants are long gestation projects and certain foreign investors came forward to invest in thermal power generation to relieve the shortage. They made the entire investment and not a single penny was spent by the government or Wapda.

Since Wapda is the sole purchaser of electricity, it was bound to buy thermal power to the extent of 60 per cent of the producers capacity. The stipulation was made to enable the investors to repay their loans. If Wapda refused to buy the power produced by them, all their investment would sink.

The producers took care to protect their investment and there are built-in provisions in the contracts that if a party is unable to perform its obligations, it becomes liable to pay compensation. The matter is finally to be decided by international adjudication and arbitration.

A contract, the Wapda counsel said, cannot be cancelled merely because the projections it was based on did not materialize and it became difficult to perform by one of the parties. It is not open to a party to terminate a contract only because it is suffering a loss.

Wapda, he added, is fully conscious of the problems faced by the consumers on account of high tariffs. It is, however, trying to find a solution within the contractual framework. The contracts are being renegotiated to lessen their rigour.

The petitioners’ counsel submitted that no relief has occurred to the public by renegotiation of contracts and the ‘sole effect’ is that their life has been extended by 10 years.

Mr Kazi also questioned the delay shown by the petitioners in agitating the issue. They kept mum when the contracts were being advertized and negotiated in 1994. It was only in 1998 that the contracts became ‘unconscionable’.

Earlier, the counsel produced the record pertaining to the impugned contracts as directed by the court. The proceedings would continue on Tuesday.