ISLAMABAD: The ministries of finance and water and power have developed serious differences over implementation of controversial rental power projects (RPPs) before their contract clearance by the Asian Development Bank (ADB) under a decision by the federal cabinet.
Informed sources told Dawn the finance ministry is worried over financial implications of the projects in case these reach the commissioning stage before their proper approval by the ADB and the federal cabinet.
The water and power ministry, on the other hand, is more concerned to meet the Dec 31 deadline, these sources said.
Sources said the Asian Development Bank resident chief Rune Stroem has conveyed to the government that most of the contracts already signed by the Private Power and Infrastructure Board (PPIB) seemed heavily tilted towards private investors without taking care of interests of the government and consumers and may not meet international economic standards of prudence and fairness.
It was in this background that the finance ministry has asked the water and power ministry to put on hold the progress on controversial rental power projects (RPPs) until the Asian Development Bank (ADB) clears them for implementation.
They said Finance Minister Shaukat Tarin was surprised to know that the power ministry and the Private Power and Infrastructure Board (PPIB) were moving ahead with the RPPs despite a cabinet decision to have RPP contracts audited by the ADB.
The finance ministry believed that in case the ADB calls into question any of the RPP contract, it would not only embarrass government politically but could provide an opportunity to the sponsors of the RPPs to seek compensations through arbitration.
These sources said the PPIB had told the finance ministry that it had not received any official communication about the federal cabinet’s decision for ADB’s audit and hence it was moving on the rental power projects as ‘business as usual’ and planned to commission about eight projects of 1180MW of generation capacity within few weeks.
These sources said the issue was expected to be taken up with the prime minister and the federal cabinet over the next few days to avoid litigation and financial implications.
These sources said the ADB has separately taken up with the finance ministry a sort of non-cooperative attitude of the power sector managers in providing complete record of the RPP contracts and other details.
The finance ministry source said most of the RPP contracts were finalised in a haste and the power sector managers made commitments for mobilisation advances to the sponsors on ‘first come first served basis’ without taking into account the location and energy requirement in that particular area, economic prudence and technical efficiencies.
The prime minister had announced a couple of months ago after a cabinet meeting that all the RPP contracts would be subject to third party validation by the ADB to ensure transparency in transactions to address concerns raised by the opposition.
The ADB is expected to submit its formal report on the contracts by end of this month, the sources added
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