NOW that a bench of the Supreme Court has taken up a suo motu notice of the allegations of corruption in rental power projects, some positive results may be in the offing.

These projects were given a go-ahead signal last year and were expected to generate 1,206 megawatts to end loadshedding but still remain off line.

On January 30 this year, the Transparency International, Pakistan chapter, had, in an application, asked Chief Justice Iftikhar Mohammad Chaudhry to take suo motu notice of alleged corruption in the award of the contracts. It said it had been pointing out to the government for the past eight months about rampant corruption in high places with regard to the RPP projects but the latter took no remedial steps.

The court has summoned on October 4 Syed Faisal Saleh Hayat, a seasoned politician and an avowed critic of the RPPs, to substantiate his charges of corruption in RPPs against the government he had levelled in a speech in the National Assembly on June 19. The court took this decision after the Pepco counsel Khwaja Tariq Raheem said in the court on September 23 that those making such allegations should also prove them. The court also asked the chairman of Wapda and Pepco's managing director to appear on the next date of hearing and also issued notices to RPPs.

Faisal Saleh Hayat had on several occasions made allegations of massive corruption and kickbacks in the rental power deals and challenged the government to take him to any court and he would prove his charges. During his speech in the NA, he had declared that he would quit politics if he failed to prove his charges. The prime minister, who was present in the house, did not bother to respond to the corruption charges. On the other hand, Raja Parvez Ashraf, the minister for power, while rejecting the allegations had stated that he was 'prepared to be hanged' if any of the allegations were proved.

This polemic apart, the fact remains that serious differences had developed between the ministries of finance (headed by Shaukat Tarin) and water and power over implementation of the controversial projects. The finance ministry was worried over the extraordinarily high cost of the projects.

The Asian Development Bank resident chief Rune Stroem is reported to have conveyed to the government that most of the contracts already signed by the Private Power and Infrastructure Board (PPIB) seemed heavily tilted towards private investors without taking care of interests of the government and consumers and may not meet international economic standards of prudence and fairness.

In a report on the energy efficiency investment programme in Pakistan, released on September 30, 2009, the Asian Development Bank had observed that there will be “a limited impact” of the RPPs on the country's power generation scenario. It was in this background that the finance ministry insisted that the ADB must undertake a comprehensive study and analysis of the entire plan of the RPPs and until it clears them for implementation, no measures should be taken.

The Asian Development Bank prepared a report, as desired by the government, and it was released in the last week of January. It proved to be a turning point in the controversy over the rental plants as it dispelled the prevailing confusion about the projects and enabled the government to take firm decisions. Prior to this, the power minister Raja Pervaiz Ashraf appeared determined to award contracts to all the RPPs saying this was the only solution to the power crisis.

The report highlighted major inconsistencies and weaknesses in the contracts, violation of procurement and regulatory procedures, lack of available capacity utilisation and up to 87 per cent increase in customer tariff in two years. It said that the 14 RPPs cannot eliminate the loadshedding.. The ADB suggested that about 2,000MW of electricity could have been utilised from within the existing system through full-capacity utilisation of IPPs and energy conservation measures. The report said that RPPs would put an additional financial burden of up to Rs207 billion on the government.

On January 28, the federal cabinet reconsidered the RPPs issue in the light of the ADB report and decided to allow only eight projects to go ahead with production target of 1,156MW before June. The ADB said it did not clear these eight RPPs on merit but gave the go-head as a fait accompli because the contracts had been signed and payment of mobilisation advance made.

Regarding the remaining six RPPs (which are to produce 838MW), the cabinet decided to review legal implications before a final decision. It dropped five RPPs of 256MW as advised by the Asian Development Bank.

A news report on September 17 quoting a document of the ministry of power said that the government has paid Rs22.35 billion to owners of nine rental power plants having a combined capacity of 1206 MW electricity, but none of the projects has become fully operational so far. This money was given under the head of Advance Payment Guarantee (APG) and mark-up at the rate of 15 per cent since default in targeted date of commissioning. And Rs19.008 billion was paid under the head of APG and Rs3.344 billion under the head of total mark up since advance payments to RPPs.

The Supreme Court was informed by the Pepco counsel on September 23 that a penalty of Rs190 million had been imposed by the government on three rental power projects for failing to come on line by their deadlines. Two projects had been shut down. These are 110MW Pakistan Power Resources projects in Guddu and Multan. Penalties have also been imposed on the 201MW Reshma Rental Generation, 232MW ship-mounted Karkey Karadeniz Elektrik Uretin of Turkey in Korangi, which was to start producing electricity from mid-May this year, and 150MW Techno Energy in Sialkot.

A 150-megawatt RPP belonging to Techno E-Power, installed in Samundri, has so far consumed furnace oil worth Rs225 million provided by the government over the past year, but has failed twice to pass a reliability test run, essential to join the national transmission system.

Another ADB study on September 14 said that the reforms process in power sector has been slow and power supply and infrastructure requirements have not kept pace with the rising demand. It held the ministry of power and Nepra responsible for most of the ills the power sector is facing.