The Nandipur fiasco

With three separate inquiries going into the failure of the Nandipur Power Project, the power plant is becoming a major point of embarrassment for the PML-N government. The Ministry of Water and Power, an external auditor and the auditor general of Pakistan have all been ordered to conduct inquires into the project, and glaring lapses are coming to the front which cannot just be a consequence of a sleight of hand. The cost of the non-functional power plant has already been confirmed to be around Rs50 billion, with around Rs15 billion of the amount being just to cover the interest on loans taken for its construction. According to reports, if the project was made fully operational soon it would collapse quickly and become a huge liability on the government as the Rs11.31 per unit tariff will be unable to cover the cost of generation. Despite that, reports have come in of the prime minister having been briefed by the project’s management that it will be fully functional by the first week of October. The Northern Power Generation Company Limited (NPGCL) has submitted a review petition on the Nandipur Power Project with the National Electric Power Regulatory Authority (Nepra), saying that the project is likely to cause a loss of Rs30 billion per year to the national exchequer if made operational at the given rate, with a loss of Rs6.5 per unit at full capacity expected.
Despite such glaring errors visible at a short glance, it has come as a surprise that the NAB probe into the Nandipur Power Project is not including the Musharraf government in the inquiry. It was the Musharraf government that had awarded the project without inviting open bids. It has become clear that the agreement for the Nandipur plant between the Pakistan government and a banned Chinese company was signed on January 28, 2008, when the country was under a caretaker setup. This joins the project to a number of controversial agreements signed during caretaker governments. The Ministry of Water and

Power probe has confirmed three major technical problems with the project, including the import of a low capacity furnace oil treatment plant, flaws in the long-term outsourcing contract for operation and maintenance, and the short-term contract awarded to engineering, procurement and construction contractors. This is supplemented by the poor quality fuel supplied to the project for its early operation. While the petroleum minister has expressed his belief that the project would work fine on natural gas, it is bizarre to note such glaring errors in procuring the dual fuel combined cycle technology for the plant. Some of the blame appears to be apportioned on the chief minister of Punjab, but it remains to be seen if any such report will be made public. A number of these major flaws in the project appear to have been kept undisclosed by the project’s management team. The situation in Nandipur is compounded by the fact that around 10,000-15,000 vacancies in Discos and Gencos have not been filled, apparently on the directives of the Privatisation Commission, due to the reason that the organisations have been marked for privatisation. The result has been major issues in generation, distribution and billing. With the Nandipur project managing director pointing the finger at the Board of Directors of Genco-III, it is clear that the project will now bring down many. Whether the hands of the law will be extended to any big fish in government is as yet unclear, but what is essential is a transparent, impartial and fair probe.