To be presided over by the Finance Minister Ishaq Dar the top economic decision making panel will grant Sovereign Guarantee of Rs 23.496 billion against the additional financing facilities, Rs 1.002 billion on account of demurrage and detention charges besides waiver of Rs 34.7 billion of Federal Excise Duty (FED) applicable on equipment to be imported, official sources told Business Recorder.
Ishaq Dar, in his budget speech, had revealed that the highly economical power project, Nandipur, which initially had a cost of Rs 23 billion was a victim of criminal negligence and its imported machinery has remained stranded for the last three years for want of clearance of certain documents from government departments. Today, its cost has risen to Rs 57 billion.
The PML (N) government took immediate cognisance of this situation and is making necessary efforts to have the documents released and obtain fresh approval from the competent fora. As soon as these are in place in the next few weeks, work on its construction will start immediately and be completed in 18 months. The Finance Minister also announced that all those responsible for inflicting this phenomenal loss on the nation shall be brought to justice.
Official documents obtained from the Finance Ministry show that the ECC meeting was informed on July 20, 2011 that for installation of the 425MW Combined Cycle Power Plant at Nandipur, Gujranwala, at an agreed EPC price of $329 million, to be executed by Dong Fang Electric Corporation (DEC) Ltd, China, the Ministry of Finance was required to provide GoP guarantee for the loan amounting to $329 million (EPC contract price) with a foreign currency component of $164.9 million and € 78 million and local component of Rs 3.0 billion.
According to documents, project L/Cs for Rs 19.150 billion (equivalent to $148 million and € 70 million being 90 percent of EPC price) were opened on September 15, 2008 by HBL and NBP syndicate in favour of DEC China, along with a loan of Rs 5.3 billion to meet the local currency requirement, with the support of Ministry of Finance.
Documents further suggest that Ministry of Finance mandated BNP Paribas and HSBC consortium on June 4, 2008 to arrange foreign loans (eligible for up to 85 percent of EPC price), namely COFACE facility for French portion and SINOSURE facility for Chinese portion, to retire shipping documents against the security of GoP sovereign guarantee.
ECC was further informed that the officers of Northern Power Generation Company Limited (NPGC) went to Beijing (China) for signing financial documents, duly vetted by the Law & Justice Division and approved by the Finance Division and Ministry of Water and Power. However, the foreign lenders proposed some last-minute changes in the finance documents.
The Ministry of Water and Power claimed that the proposed charges were not significant which was why these were incorporated and accordingly the documents were signed. Upon return, the changes were approved by the Ministry of Water and Power and the Finance Division. However, when the documents were sent to Law and Justice Division for legal opinion as Condition Precedent (CP), that Division returned the documents on the ground that the credit agreements and GoP guarantee had already been signed and the Rules of Business 1973 did not provide for ex post facto approval in such matters.
The sources said first shipment carrying plant equipment arrived at Karachi Port in January 2009. The HBL and NBP Syndicate refused to allow clearance in the absence of guarantee and securities, which could become effective only on the basis of Law and Justice Division's clearance while the correspondence between the Ministry of Water and Power and Law Division continued, the plant equipment could not be transferred to the site, which resulted in demurrage charges of Rs 873 million.
The Ministry of Water and Power maintained that the signed documents were not yet effective and did not materially or adversely affect the rights and obligation of the Government of Pakistan. While this issue could be resolved between the two Ministries at a later stage, presently, there was a need to clear the plant's equipment and get it transported to the construction site to save it from rusting and damage caused by weather and also to commission it by December 2011 deadline.
After clarifying the position, the Ministry of Water and Power sought approval of ECC for waiver of the demurrage charges amounting to Rs 873 million, accrued on the plant equipment and the financing documents signed in Beijing, China with the last-minute changes.
The Supreme Court of Pakistan on June 21, 2013 had given one week's time to the government, the respondent in the petition, to explain the delay in the execution of Nandipur and Chicho-ki-Malian power plants. The respondents in the case included Babar Awan, three former law secretaries, including incumbent Federal Shariat Court Chief Justice Agha Rafiq, Election Commission of Pakistan's member former Justice Riaz Kayani and Masood Chishti.
The respondents were told to file replies to former Justice Rehmat Hussain Jafferi Commission for delaying the approval for shifting of machinery for Nandipur and Chicho-ki-Malian Hydropower plant from Karachi port during their tenure, causing loss of Rs 113 billion to national exchequer.