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Details of Objections in Payment of Circular Debt of Rs 480 Billion

Finding regarding setting-aside amount of liquidated damages

Non-adjustment of liquidated damages of Rs 22.916 billion against


payment of circular debt.
(As per section 9.5 of the PPA, amount of Liquidated Damages (LDs)
was payable by IPPs which were set aside upon settlement of Circular
Debt in violation of procedure in vogue. Whereas the same amount
was required to be recovered / adjusted instead of setting aside)

Finding regarding payments of IPPs


a) Issues regarding Irregular/Excess/Avoidable Payments
Irregularities in Capacity Payments.
Unjustified capacity payment for idle Capacity Rs 32.451 billion
NTDC made the capacity payment for idle capacity without
purchasing electricity, despite having declared available capacity by
the IPPs.
Unjustified capacity payment for forced outages because of fuel
shortages Rs 2.711 billion.
Non supply of energy upon forced outages was attributed to fuel
shortages, whereas according to the section 5.14 (a)&(b) of the
contract agreement , provision of fuel was the responsibility of IPPs.
Hence, capacity payment upon forced outages due to fuel shortages
was unjustified.
(Para3.3.2)
Irregular capacity payment on account of non-provision of data of
Metering Committee Rs 4,630.082 million.
Irregularities in Energy Payments
Discrepancies in Meter Reading System for Energy Payments Rs
16.336 billion
Energy payment invoices were not supported by proper reports of
Meter Reading Committee upon which NEO was determined.
(Para- 3.4.1)
Undue favor on account of extra Energy Payment due to implausible
determination of Net Electrical Output (NEO) Rs 37.122 million
The NEO was determined upon reading of the Main Metering System
which gave more units than that of Backup Metering System that
entailed extra Energy Payment.
(Para- 3.4.2)
Imprudent Financial Management

Irregular payment on account of reimbursement of withholding tax


on Dividend Rs 264.655 million.
Re-imbursement of withholding tax on dividend was irregular
because it was personal income of shareholders rather than Pass
Through item.
(Para-3.5.2)
Recoverable amount of Rs 10.911 million due to application of wrong
exchange rate
Extra payment made due to non-adherence to ECCs decision
regarding indexation of tariff Rs 84.590 million
Contrary to the ECCs decision, the management applied indexation
of tariff on the basis of closing rate instead of minimum of selling
rate of eight (8) specified banks.
Extra payment made due to application of higher Inflation and
Exchange Rate Factor Rs 3.342 million.
Un- authorized/excess payment on account of 15% surcharge Rs
4.969 million.
Excess payment on account of 15% surcharge was made to Attock
Gen Ltd for the whole years tax liability instead of three and
half(3) months in violation of amendment made
on 15.03.2011 in the Income Tax Ordinance, 2001.
Loss due to production of electricity on Residual Fuel Oil (RFO)
instead of Gas Rs 6.253
Billion
Irregularities of Supplemental Charges /Pass through Items
Unauthorized/bogus payment on account of Workers Profit
Participation Fund(WPPF) Amounting to Rs 10.359 million.
Payments were made to employees and unauthorized persons as
against provisions of the Power Purchase Agreement (PPA).
Unjustified payment on account of Workers Profit Participation Fund
9WPPF) Rs 6.476 Million.
The amount deposited by the IPP (Fauji Kabirwala Power Company
Limited) on account of WPPF in the Government treasury was less
than the amount claimed for reimbursement.
Unjustified payment on account of General Sales Tax (GST) Rs
17.733 billion
The amount of GST, being a pass-through Item, was reimbursed to
the IPPs to the different IPPs without having evidence including paid
challan of GST against the provision of PPA.
Unjustified payment on account of Open Cycle Cost (OCC) charges
Rs 263.963 million
The said payment was not covered under the Power Purchase
Agreement (PPA).
Implausible/Defective Clauses of Agreements

Un-necessary provision of Supplemental Charges in the contract


entailing payment of Rs 5.538 billion.
The invoices of Capacity Purchase Price (CPP), Energy Purchase Price
(EPP) & Late Payment Charges (Interest) cover all the
expenses/compensation of the IPPs/ hence, in addition to it, unnecessary inclusion of clauses of Supplemental Charges in the PPA is
a sort of undue favor to the IPPs.
Finding regarding payments to GENCOs/Oil & Gas Suppliers
a) Irregularities in Payments
Overpayment to NPGCL amounting to Rs 2.424 billion
Over payment due to direct payment of fuel purchase instead of
payment of Fuel Cost Component (FCC).
Excess payment made to PSO on the purchase of furnace oil at
higher rate against short supply- Rs 5.266 million
An amount of Rs 5.266 million was excess paid for purchase of
costlier RFO due to short supply of cheaper RFO by PSO.
b)Other irregularities/lapses
Non-existence/Non-renewal of Gas Purchase and Sale Agreements
with the Gas Supply Companies Rs 28.849 billion.
Gas sale and purchase agreements were not signed with SNGPL.
Further Agreement with Mari Gas Company was not renewed since
2010 Rs 18.641 billion.
Loss due to violation of Public Procurement Rules- Rs 1.319 billion.
The transportation cost of RFO from Zulfiqar Oil Terminal (ZOT)
Karachi was higher than that of PARCO working in the vicinity of
Muzaffargarh. Had the fuel been purchased from PARCO, loss of Rs.
1.319 billion would have been avoided.
Finding regarding a Non-cash Settlement
a) Excess/unjustified adjustments/ settlements
Unjustified settlement of circular debt Rs 25.104 billion
Relevant invoices regarding adjustment of Rs 25.104 billion by
Finance Division were not provided.

b) Excess payment to SHYDO due to non-provision of standardized


clause of energy Payment in PPA Rs 403.116 million.
Payment was made on the basis of average monthly generation
instead of Net Electrical Output (NEO) dispatched due to non-provision
of standardized clause of energy payment in the Agreement.
(Para-3.13.2)
Unjustified excess adjustment of debt service liability in non-cash
settlement against WAPDA (Hydroelectric) Rs 15.196 billion.

According to the reconciliation statement of debt service liability, the


total payable amount by Government of Pakistan on 31st May, 2013
was Rs 74.887 billion instead of Rs 90.083 billion. Hence, excess
amount of Rs 15.196 billion was adjusted by th Finance Division.

Unjustified payment on account of General Sale Tax Rs 761.705


million.
General SALES Tax (GST), despite being Pass through Item, was paid
without documentary evidence which was pre-requisite under the
provision of PPA.
Unjustified payment on account of levy for IRSA Rs 20.174 million
There was no provision of payment of levy for IRSA in the PPA relating
to Chashma Nuclear Power Plant.
Unjustified excess adjustment of debt service liability of Rs 6.572
billion in Non-cash settlement against GENCOs.
b) Other Irregularities/lapses
Non-testing of Metering System resulted in un-authentic meter reading
and billing of Rs 100.964 billion. A portion of this billing can therefore
be inaccurate and may have resulted in a loss to the national
exchequer.