ISLAMABAD: The Auditor General of Pakistan (AGP) has found more than Rs80 billion in irregularities in the Nandipur Power Project, including the loss of more than Rs17bn from delays caused by the law ministry.

Coincidentally, an Islamabad accountability court deferred its verdict on Monday on an application seeking the acquittal of senior PTI leader Dr Babar Awan in the Nandipur corruption reference. The announcement has been postponed until March 8.

The special audit report on the accounts of ‘4256-525 megawatt combined cycle power plant project Nandipur’ has claimed that the project lost approximately Rs17.1bn “due to delay in legal decision by Ministry of Law and Justice and Parliamentary Affairs.”

Dr Awan held the law minister portfolio in the PPP government when the project was in the approvals process.

According to the report, the “generation loss due to delay in finalization of operation and maintenance contract of the plant” was approximately Rs4.5bn. Another Rs3.8bn were lost due to the non-conversion of the plant from furnace oil to gas, while irregular and excessive payments to the contractor on account of claims lodged against unapproved amendments was Rs1.2bn.

The award of contract in violation of procurement rules costRs46bn.

Other losses were related to the irregular appointment of the managing director of the project, uneconomical generation, poor performance and the illegal resumption of work with blacklisted firm M/S Dongfang.

The report recommended investigating and fixing responsibility upon the persons who caused deliberate delay in issuance of legal opinion resulting in heavy losses to the national exchequer, irregular award of contract, poor performance and so on.

Giving a background on the project, the report said its PC-I was prepared and submitted for approval in September 2015. The Central Development Working Party (CDWP) cleared the project in October, and the Economic Coordination Committee (ECC) had approved the project in December 2007.

Work commenced in October 2008 with April 16, 2011, as the date of completion. Project shipments began on schedule but foreign loans could not be secured because the Ministry of Law and Justice and Parliamentary Affairs held its legal opinion – a major condition precedent.

The availability period for the loans was up to Aug 31, 2011, but the legal opinion was issued on Oct 19, after the availability period had expired.

The report said: “A loan agreement of Rs5.3 billion had also been signed with a syndicate of local banks to meet with the local currency requirements. As the foreign credit facilities did not become operative, the syndicate of local banks continued to make forced payments against letter of credit documents.”

The Nandipur power plant remained closed even after its completion because of indecision on the outsourcing of its operation and maintenance. In the meantime, controversy erupted in the media regarding the significant increase in the project cost, inviting criticism from society. This led the government to order a number of inquiries into the project.

The National Accountability Bureau (NAB) in Rawalpindi filed a reference against seven politicians and officials on Sept 5, 2018.

NAB contended that the two year, one month and 15 day delay in the project resulted in the loss of Rs27.3bn to the exchequer. The project, which is located in Gujranwala district, was not completed and operated on time because the suspects failed to issue legal opinions.

NAB officials said the Supreme Court had decided a 2011 constitutional petition on delays in the project and formed a commission that submitted a report on April 9, 2012.

That report held mainly law and justice officials responsible for the delays, and the SC subsequently referred the matter to NAB.

The Nandipur project was approved by the ECC on Dec 27, 2007, at a cost of $329 million. A contract was signed on Jan 28, 2008, between the Northern Power Generation Company the Dong Fang Electric Corporation in China. Two consortiums – Coface, for approximately €69m, and Sinosure, for $150.2m – were set up to finance the project.

The Ministry of Water and Power and sought the law ministry’s legal opinion on the project in accordance with the agreement’s schedule in July 2009, but the suspects repeatedly refused to issueit. The water and power ministry also failed to take concrete measures to resolve the issue.

According to details shared by NAB, the legal opinion was issued in November 2011, after Dr Awan was replaced as law minister.

Published in Dawn, February 26th, 2019