According to the section 9.8(@)(1) of Power Purchase Agreement, the power purchaser will pay the company the amount shown on the invoice delivered, less deductions for any disputed amounts or portions of amounts shown in invoice (f); payment received by either party shall be applied against outstanding invoices on "First In, First Out (FIFO)", principle.
Power Division in its letter of March 19, 2018 stated "to keep the system running, it is proposed that already approved amount of Rs 80 billion by the Economic Coordination Committee (ECC) of the Cabinet for the purpose of rolling-off of existing facilities amounting to the sum of (i) Rs 15 billion; (ii) Rs 40 billion and (iii) Rs 25 billion.
In CPPA-G, a payment of Rs 53.334 billion was disbursed among IPPs by applying weighted average method for making payments against IPPs' invoices in contravention of the Power Purchase Agreement (PPA). The Audit argued that the application of weighted method was not judicious as invoices pertaining to previous year were ignored and interest accrued on them was not paid. Furthermore, the disbursement was made without deduction of pending liquidated damages. Hence payment of Rs 53.334 billion to IPPs was made without observing any standardized policy and PPA provision which was irregular.
The matter was taken up with the management in April, 2018, which replied that the payments to IPPs were made based on verified billing of each IPP by achieving payment level of 79 per cent of the billing. Invoices of the IPPs were cleared on FIFO basis. The payment on the basis of aging would have resulted in non-payment to new entrants especially coal-fired power plants causing default of CPEC projects. Moreover, there was no loss to the power generator as mark-up was paid on outstanding balances. The reply was not agreed to as 79 per cent weighted average on current balances was worked out on verbal orders instead of written orders.
The Audit maintained that weighted average should have been worked out on aging of invoices rather than billing/payment ratio, which was irregular payment mechanism. The Audit has recommended that the management needs to inquire the matter for fixing responsibility regarding irregular payments to IPPs without observing ad pre-audit checks.
The Audit "non-recovery on account of energy, mark-up and market fees from Discos-Rs 1.142 trillion" states that in CPPA-G, sale of energy and mark-up amounting to Rs 1.142 trillion and market fee of Rs 94.78 million was receivable from Discos. Non-recovery of such a huge amount also contributed adversely on company's financial position for payment to IPPs and ultimately piling up of circular debt for which CPPA-G had to obtain loans from PHPL.
Poor financial management resulted in non-recovery of Rs 1.142 trillion from Discos on account of sale of energy, mark-up and market fee up to the financial year 2017-18.
The DAC in its meeting held on December 20-21, 2018 directed the management to expedite the efforts for recovery of receivables from Discos under verification by audit. In CCPA-G, an amount of Rs 110.6 billion was recoverable from Discos and K-Electric on account of mark-up on delayed payment. Moreover, markup on delayed payment amounting to Rs 27.3 billion pertaining to the FY 2008-09 to 2015-16 was also recoverable from K-Electric. Neither this amount was recovered/adjusted nor legal course of action taken. Non-recovery of such a huge amount also contributed adversely on company's financial position for payment to IPPs and ultimately piling up of circular debt for which CPPA had to obtain loan from PHPL. Non adherence to BoD's instructions resulted in non recovery/adjustment of mark-up of Rs 138 billion on delayed payments from Discos and K-Electric up to the financial year 2017-18.
