AGP report holds Musharraf govt responsible for Nandipur losses

ISLAMABAD: An in-depth study of the Auditor-General of Pakistan (AGP) report on the Nandipur power project establishes beyond any doubt that General Pervez Musharraf’s government was basically responsible for making not only wrong decisions and approvals but also taking illegal steps including appointment of EPC (Engineering, Procurement, Construction) contractor.
It is also clear from the dates given in the report that the shipment of turbines and low-capacity Furnace Oil Treatment Plant (FOTP) was the result of specifications given in the agreements signed and finalised by General Musharraf’s team only after completion of tenure of the PML-Q government in November 2007 and before the coming in of the PPP government in March 2008, using his selected people in the caretaker cabinet on December 27, 2007, January 28, 2008 and February 6, 2008 without waiting for an elected government which was to assume power in a few weeks.
The AGP report clearly held that despite the delay caused during previous regimes and purchase of a low capacity FOTP which had gathered dust at the Port Qasim for years, all the three gas turbines as well as the fourth steam turbine had successfully carried out performance test. All these are operational now.
The AGP report adds that according to the contract agreement, the FOTP must have capacity of 31m³/h per skid but during test run, it was found that four installed skids in the FOTP had an average production of 18.882 m³/h (39% lower than required).
According to the report, it was a fault at the end of the EPC contractor and two more skids are needed to be installed to achieve the desired capacity of 31m³/h per skid.
It is worth mentioning here that this EPC contractor had already defaulted and provided substandard locomotives to the Musharraf government, inflicting losses of billions of rupees but this contract was again awarded to it. The AGP report, without naming Musharraf but by giving exact dates, makes a shocking revelation that the Musharraf government awarded the contract of the Nandipur power project to the EPC contractor M/s Dongfang despite its previous failed shipments of railway locomotives “without any bidding”.
While discussing illegal acts committed by Musharraf using his caretaker government, the report says, “EPC contract was awarded in January 2008 in spite of the fact that no bidding process was carried out. M/s Dongfang Electric Corporation Limited (DECL) was highest bidder in another project at Chichoki Mallian, was offered to do this project without any process, which was illegal and unjustified.” At another instance, on the same point, the report says, “It was done without any bidding process and M/s Dongfang was second lowest bidder in another project. The award of the project, therefore, was patently illegal and unauthorized and also against the PPRA rules.”
Determining capacity of the FOTP to ensure required output of 31m³/h per skid was sole responsibility of EPC contractor hired by General Musharraf despite all its shortcomings and failures.
In its later part, while describing the events that led to the delay in the project, the AGP report holds Babar Awan-led ministry of law and justice of PPP regime responsible as it gave its legal opinion for availing foreign loans too late after expiry of period of availability of these loans.
However, the AGP report could not explain how the law ministry could swiftly issue a favourable opinion after irregularities and illegalities were committed by the Musharraf regime in the award of the EPC contract. This shows that NAB decision to acquit former law minister Babar Awan of all the charges regarding delaying legal opinion pertaining to acquiring foreign loans for Nandipur project was correct.
How much loss the national exchequer has incurred because of these decisions of General Musharraf, now declared patently illegal by the AGP report, can be calculated from the latest figures of electricity produced in one month after the present government made the plant operational. These figures disclosed by the federal government show that the Nandipur plant has produced electricity worth Rs5.6 billion after becoming operational. Originally the project was to start in October 2008 and was scheduled to be completed on April 16, 2011. So the plant started its operations 54 months after its actual date of completion and keeping in view the production during last one month, the losses incurred because of illegal decisions taken by the Musharraf government and award of illegal contracts can be easily calculated.
The AGP report has also calculated exact figures of losses being incurred because of low capacity of FOTP. In the current situation, monthly recurring generation loss until achievement of the required guaranteed capacity of FOTP has been calculated at 62.02 MkWh units valuing Rs916.16 million. The government has made the Musharraf-hired EPC contractor agreed to undo its blunder and upgrade the FOTP by installing two more skids in the FOTP. The EPC contractor is upgrading the FOTP which will take four to five months. More calculations can be done to find out the total losses incurred. The AGP report declares that Rs32 billion had already been spent before the present government took over the project. The loans were acquired and the machinery was purchased. Had the present government not moved to complete the project and undo the wrongs, blunders and illegalities by the Musharraf government, the total losses would have become unbelievably high and still the national exchequer had to return the tens of billions of loans acquired for the dead project.
While attacking the Nandipur power project because of delay of a few weeks in start of its operations after its successful completion and test run, no one ever mentioned that the present government had only two choices: either to scrape the project completely and continue to pay back debt for the next 30 years for having nothing or to complete the project, which would produce relatively costlier electricity, as at present more efficient machines are available in the market. The government went for the second option keeping in view the huge supply-demand gap so the electricity produced by this plant could be used only when there is a shortfall and need. However, when the gas plant will be installed and gas will be available, the plant will be producing cheaper electricity.
It is misunderstood by the writers of the AGP report that the plant has been completed in all regards and still the gas plant is yet not installed. As a matter of fact, the total installation period of the whole plant is more than two-and-a-half years (as originally it was from October 2008 to April 2011). The project during this government was started in October 2013. At present work to install gas plant is in progress by the EPC contractor and its completion will take a few more months and this is very much according to the plan. It has been reported quoting AGP report that the plant has ‘design fault’. The AGP report at no place has mentioned that there is some “design fault” in Nandipur power plant. “Design fault” is an engineering term and if some plant has a design fault it could be operated. Even the FOTP had no design fault and is of ‘low capacity’.
The AGP report has calculated that after installation of gas plant, more than Rs15 billion will be saved annually. According to the government plan, the process of two-phased augmentation of gas pipeline will be completed by December 2016 (first phase will be completed next month) and gas will be available for Nandipur as well as other three LNG-based plants being installed in Punjab of total capacity of 3,600 MW. Regarding delay in hiring of O&M firm, the report held responsible GENCO-III & V boards for delay in decision making. However, the report also quoted version of management of Nandipur plant which says it approved an O&M firm after completing due process and on the other hand the management board of GENCO-III which owns Nandipur project holds the opinion that it did not approve it because of high rates of the said firm. It is worth mentioning that this delay in decision making caused delay of around 10 weeks, which created a big hue and cry for the plant which was delayed for four years and six months because of illegal decision making and wrong award of contracts by General Musharraf using his caretaker team headed by caretaker Prime Minister Mohammadmian Soomro. On November 3, 2007 Musharraf imposed state of emergency in the country. On December 27, 2007 ECC approved Nandipur power project. On January 28, 2008, GENCO-III entered into an agreement with M/s Dongfang for Nandipur power plan as the federal government has already approved it. On February 6, 2008, Ecnec also approved Nandipur project which was pending since long, along with other 23 mega projects, without waiting for a democratically elected government which was supposed to assume office just four or five weeks later.