MULTAN, Feb 10: A local textile unit has been purchasing electricity from Multan Electric Power Company (Mepco) on subsidised rates for the last five years while selling ‘surplus’ power to the company at higher rates at the same time, Dawn has learnt.

According to sources, the Mepco authorities kept paying hundreds of millions of rupees to the mills under the shady deal until the National Electric Power Regulatory Authority (Nepra) smelled the rat and objected to the price mechanism that has been causing huge losses to the exchequer.

The sources said Mepco signed a power purchase agreement with M/S Mahmood Textile Mills Limited on October 4, 2007. The parties agreed that the unit would provide five megawatt residual furnace oil (RFO) based 11Kv electric power to Mepco for the duration of one year from the date of connectivity with the company’s system. It was also agreed the duration could be extended with the mutual consent of the parties and the electric energy supply would be ensured by the mills through installation of necessary equipment.

The sources said that keeping in view the scope of profit the agreement was revised on October 22, 2009, by upward revising the megawatts from five to nine.

Although the agreement required supply of power to Mepco through an independent radial feeder isolated from any other 11Kv system of the generating facility but this clause of the agreement was never implemented, they said.

It transpired in the light of expert opinion given by some technical officials desiring anonymity that the power producer used the non-implementation of that ‘crucial clause’ of the agreement to its maximum benefit.

“The textile unit instead of supplying power to the power purchaser through independent radial feeder used it (electricity) for self-consumption while receiving the full (bill) amount from Mepco,” one of the officials disclosed.

According to the documents showing the details of power sale and purchase, during the three years from fiscal year 2009-10 to FY2011-12 Mepco paid Rs1.887 billion, along with additional 16 per cent General Sales Tax (GST), to the power generating textile unit.

The mill received from Mepco Rs518 million during FY2009-10, Rs711.221 million in FY2010-11 and Rs657.729 million in FY2011-2012, the papers show. On the other hand, during the same period, the amount the textile mill paid to Mepco was Rs437.154 million with Rs63.914 million in 2009-10, Rs151.524 million in 2010-11 and Rs221.716 in 2011-12.

In FY2009-10 the textile unit sold electricity to Mepco at Rs12.084 per unit while it purchased it at Rs8.54 per unit from the company. Similarly, in FY2010-11 the price of a unit Mepco purchased was increased up to Rs14.425 while the mill’s purchasing rate was decreased to Rs8.51. In FY2011-12 the mills charged Rs18.263 for a unit while purchasing the same for Rs8.95.

The sources said that National Electricity Power Regulatory Authority (NEPRA) having the mandate to regulate power sector, including determination of tariff and other terms and conditions of power supply in the country, had been bypassed in the deal.

They said following Nepra intervention in the ‘arrangement’, the textile unit had closed its generation facilities, apparently fearing recovery of the misappropriated amount as an audit team had also objected to the price mechanism.

Mepco Chief Executive Officer Chaudhry Muhammad Shakeel said no violation of agreement was done in the sale-purchase process. Instead of explaining the absence of an independent radial feeder as required under the agreement between Mepco and the textile unit, he insisted that all the terms of the deal were fulfilled.