In a letter sent to the Prime Minister on December 4, Transparency International Pakistan Adviser Syed Adil Gilani has drawn his attention to the letter sent by Transparency International Pakistan on November 10, on the subject and requesting for necessary action as the reports contain serious allegations of criminal acts of adding eight percent water in furnace oil against the allowed limit set by to Pakistan Standards and Quality Control Authority (PSQCA) of a maximum 0.5 percent, which has caused Rs 42 billion loss in 2011 for adulterated residual furnace oil.
He informed the Prime Minister that Public Procurement Regulatory Authority (PPRA) had also questioned PSO on October 19, 2012 and asked it to submit its report on the allegation of illegal award of unsolicited contract to PNSC, and further informed PSO that "unauthorised breach of any rule of Public Procurement Rules 2004 amounts to mis-procurement. PSO has, however, failed to justify the alleged illegal award of contracts to PPRA till date."
Adil Gilani said the allegations needed to be taken seriously by the Prime Minister, as PSO was continuing the practice of awarding illegal contracts. SECP had asked PSO for reply to whether any unsolicited contracts were awarded by PSO and their legal standing under the laws and regulations of Pakistan, applicable on PSO. SECP had also asked PSO for their compliance in relation with key factors identified by the Supreme Court of Pakistan in its RPP Judgment of March 30, 2012, most important being upholding competition among firms and encouraging more firms to bid on work.
Transparency International Pakistan has brought to the PM's notice following allegations highlighted in print media:
1. That according to Pakistan Standards and Quality Control Authority (PSQCA), the permissible limit of water in fuel oil is 0.5 percent whereas in the RFO being used in Guddu thermal power plant, the water content was found to be 8 percent. "This is high enough to be considered as a major contamination in fuel oil increasing the inefficiency of the power plants inflicting huge loss of Rs 42 billion in one year. The more the water content present in the fuel oil, the greater will be the ignition delay and lesser will be efficiency of fuel," said the official.
2. That a letter of Kapco written to the PSO Managing Director, on March 6, 2012, reveals that they consume lower sulphur furnace oil (LSFO), which the PSO is supplying, has water content of 2.2 percent which has adversely affected the power plants' efficiency. The water content in LSFO is permissible at one percent.
3. That Kapco in its letter had also threatened that it is left with no option but to reject the contaminated oil supplies from PSO as the LSFO with high water content will be directly affecting the generation capability and is having adverse impact on the national economy already facing acute power shortage.
4. That Managing Director PSO, Naeem Yahya Mir, had admitted that the administrations of Kapco and Guddu power plants are also right in raising objections about the water content in furnace oil.
5. That the quality of fuel supply by PSO to power plants in 2009-10 was also found substandard which is also proven by the correspondence of Hubco and Kapco on supply of inferior quality RFO and LSFO. Both the Kapco and Hubco raised the issue with PSO and rejected several shipments between 2009 and 2010. These bulk buyers repeatedly told PSO to stop supplying them inferior quality fuel but PSO did not comply.
6. That Hubco had warned PSO to stop supplying it inferior quality RFO in various letters. Mustafa Gilani (senior business manager from Hubco) addressed Zulfiqar Jaffery (general manager consumer business) in the letter, and said: "Despite your assurances, PSO failed to supply the approved quality of fuel in the right quantity." Mustafa Gilani's letter indicates that other than supplying low quality furnace oil, the quantities supplied were also lower than what was agreed.
7. That Asia Petroleum Limited (APL), in a letter of July 7, 2009, holds its parent company responsible for supply of extremely low quality furnace oil. The letter stated that RFO provided to Hubco could not be pumped because it choked the pipeline.
8. That eminent energy expert Arshad Abbasi, Adviser, Sustainable Development Policy Institute (SDPI), had conducted a research on the adulterated furnace oil being used in thermal power plants, and said this high water content leads to high specific gravity and high ash content, leading to ignition delay and poor combustion quality. The increased water and ash content coupled with high specific gravity has lowered the calorific value from minimum required value of 18,200 btu/lb to 16,813 btu/lb.
The above allegations of PPRA violation in awarding of unsolicited contracts to PNSC, and Bakri Traders of billions of dollars as reconfirmed by SECP and PPRA, and allegation against PSO of Rs 42 billion loss in 2011 for adulterated residual furnace oil needs to be taken up by the Prime Minster seriously to save billions of dollars expected loss to the exchequer and loss of Rs 42 billion in one year due to fraud committed by PSO's criminal acts of adding eight percent water in furnace oil against the allowed limit set by to Pakistan Standards and Quality Control Authority (PSQCA) of a maximum 0.5 percent, Adil Gilani said.
Copies of the letter have been forwarded for information with request to take action under the Rules and Regulations to the following: Chairman, Public Accounts Committee, Islamabad; Chairman, NAB, Islamabad; Secretary, Ministry of Petroleum and Natural Resources, Islamabad; Registrar, Supreme Court of Pakistan, Islamabad; Auditor General, Islamabad; Chairman SECP, Islamabad, and Managing Director, PPRA, Islamabad - with a request to take action under section 5(2)(a) "monitor application of the laws, rules, regulations, policies and procedures in respect of, or relating to, procurement" and under section (5)(2)(i) of PPRA Ordinance 2002.