PESHAWAR: The Khyber Pakhtunkhwa government will investigate a scam of billions of rupees in a scheme for Clean Drinking Water for All and register an FIR against the contractor, according to a set of official documents.

The matter was also raised on the floor of the provincial assembly on Monday when the House was informed that federal and provincial governments were considering taking action against three commercial banks for releasing millions of rupees to a firm against fake guarantees.

“The government of Khyber Pakhtunkhwa is confronted with deception, forgery, fabrication and fraud,” the documents said, adding that “it is undertaking a comprehensive investigation and criminal proceedings, including registration of cases, against the management of Ideal Hydrotech Systems Limited, their partners and accomplices for forgery, fraud and fabrication”.

According to the documents, the provincial government has also contacted the State Bank for action against the three banks, their officers and officials responsible for misrouting cheques to Atlas Bank instead of a designated account in the Bank of Punjab for which they were issued.

Speaking on the issue during the provincial assembly’s session on Monday, Provincial Minister for Local Government Inayatuallah Khan said: “This is a high-profile case as the federal and provincial governments are investigating the matter.”

He was replying to a question by JUI-F MPA Mufti Syed Janan. Mr Janan said that Rs874 million had been unaccounted for in the project.

“The Bank of Punjab, Allied Bank and another commercial bank had released a heavy amount to the contractor against fake guarantees,” the minister said.

“In fact the KP government has been misled (by the banks),” the minister said, adding that provincial government had also requested the State Bank for action against perpetrators of the fraud, including misrouting of cheques.

Approved by the CDWP in 2006, the project was jointly sponsored by three ministries: environment, industries and production, and special initiatives. Under the scheme, one water filtration plant was to be installed in each union council, including the tribal areas and the northern areas, as part of a federal strategy to provide clean drinking water in urban and semi-urban areas alike.

As a result of the “fraud” millions of people were deprived of access to clean drinking water in KP, Fata and the northern areas.

After adoption of the 18th Constitutional amendment in April 2010, the programme was transferred to the province. Later, the federal government transferred Rs881.241 million to the provincial government.

Under the programme, the contractor had to install 986 plants in KP. The local government department, in its reply to the assembly, said that only 230 water filtration plants had been installed in 14 districts of the province.

An official document titled “non-encashment of bank guarantees of Rs129 million issued by the Bank of Punjab shows that contract for KP was awarded to M/S Ideal Hydrotech Systems Pakistan Ltd (IHSPL) in Nov 2007”.

The KP government, according to the agreement, released 30 per cent mobilisation advance of Rs594.435 million to the contractor against two bank guarantees from the Bank of Punjab. The contract required completion of the task by Sept 30, 2008.

The KP government held to its position that M/S IHSPL had defaulted on performance targets and served the Bank of Punjab with required notice, which was acknowledged by the bank on Sept 9, 2008.

“That any and every pretext to the contrary will be considered not only as breach of the terms of the guarantee but also as breach of trust and the KP government reserved the right proceed against the Bank of Punjab,” said the official papers.

The documents said that the National Project Director, CDWA, endorsed the position taken by the KP government in his communication addressed to the Bank of Punjab. The matter was also tabled in the National Steering Committee.

Despite very clear stand of this province, the committee decided that the contractor will provide reduced bank guarantee of Rs346.115 million to the provincial government. However, the contractor did not fulfil this commitment despite notices from the ministry of special initiatives.

The local government department said that Moid Faruki, the chief executive of IHSPL, produced a bank guarantee of Rs594 million from the Allied Bank’s BRMB branch, Lahore. The department referred the same back to the manager of the bank for verification. The verification was done.

In addition, the national project director, CDWA, also responded to communication from this department and forwarded the verification from the bank. The department initiated a note which reviewed the project, consulted a provincial project steering committee, directed the contractor to immediately operationalise the installed plants and also notified a committee for physical verification of the plants within three months.