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Posts Tagged Power Scams


Energy scam?---anonymous letter raises important questions




A letter about the energy policy, blaming a gang of four for what is described as a con operation, had the parliamentary corridors on fire.

The thrust of the letter was that the IPPs are being paid in the name of clearing circular debt as part of a larger conspiracy. It questions the credentials of the people who are involved in the energy policy and alleges this to be a clear case of conflict of interest.  The quartet is named as Mian Mohammad Mansha, his nephew Shahzad Saleem, Nadeem Babar and Saqib Shirazi of the Atlas Group.

The key players, according to the anonymous letter, are IPP power plant owners—mainly Sapphire Power, Liberty Power (Mukati Group of Karachi) and, among others, Said Power. The hired henchmen for them are Abdullah Yousaf (Chairman of IPPs Association—IPPAC),

US Citizen and Pharmacist Mussadaq Malik (Minister of State for Water and Power) and Shahid Sattar (Planning Commission official).

It gives profiles of all of them, which raises a number of questions about them but Sheeshnag keeps it for the moment and only mentions the profile of one—Mussadaq Malik.

He is described as somebody who gets in every government from Musharraf to the Interim government and is now part of the PML (N). He is a pharmacist who first emerged as the expert of development in Nasim Ashraf’s National Commission of the Human Development. Now he comes as the biggest energy expert that this country ever saw. Most people remember him as the Jamiat’s goon from FC College in Lahore. He was recommended by Syed Babar Ali to Nawaz Sharif to which Mian Sahb readily agreed—such being the mutual back-scratching arrangement among the tycoons. It is yet to be seen what Syed Babar Ali, otherwise a rare respected tycoon, saw in this pharmacist-turned-developer-turned-energy expert.

The letter explains in detail the energy policy of 1994 and 2002 and concludes that “the project costs, operational expenses, debt repayments and return on equity is covered under the Capacity Purchase Price (CPP) invoice and the fuel cost is covered under the Energy Purchase Price (EPP). Both investors are forwarded separately by companies to NTDC/WAPDA.”

The letter gives a long detail of what it alleges to be a scam. In short, it says, “the 1994 Power Policy IPPs (total 14) continue to skim and make illegal profits on the fuel (both liquid and gas fired plants) by lying about their heat rebates (plant efficiency). Such profits are conservatively estimated to be four to five per cent. Due to delays and tariff deals, they lost the remaining cushion/padding, yet have made fabulous returns.”

“The 2002 Power Policy IPPs (total 13) over invoiced the initial project setting up cost and continue to skim and make illegal profits on operational expenses and heat rate (fuel consumption). They skim money at three levels (excluding the original project cost)—operational expense, over invoiced fuel and kickbacks from OMCs.”

The letter alleges that annual returns are in the range of 35 percent to 40 percent. “Inclusive of original project cost—a payback period of two years. Not bad.”

The letter asks some questions:

Why did the PM-designate visit Mansha’s Raiwind farm for a briefing on circular debts and energy issues? Considering that Mansha is the leader of the nine IUPPs who have invoked Government of Pakistan guarantee and is in the Supreme Court, to say the least, was it not embarrassing?

Mansha and Nadeem Babar are in the energy task force. Guess what—their key recommendation—pay IPPs. Isn’t this a conflict of interest?

Munir Malik was the lawyer of IPPs. How will he defend the case of the State as Attorney General against them?

Why did PPIB and NEPRA approve without background the checking the efficiency of diesel gensets installed at the Mansha and Atlas plants and indeed the efficiency/heat rate of all power plants set up under 2002 power policy?

Is it true that the government is giving Muzaffargarh power plant to Mansha? If so, why not bid it first?

Why doesn’t the government adjust the “stolen amounts” and then the tariff formula?

It suggests that the government should ask the IPPs to share the burden with the masses. “The full adjustment should be made in six to eight quarterly payments. This will save the government Rs 200 billion as equity for starting the mid-term programme of setting up coal fired projects. Assuming a 70/30 debt equity ratio, as used by the IPPs, the government can set up thousand MWs of power generation in next three years.”


Now, all of this seems to come from another lobby, which definitely has an interest. But they do have a point that needs to be studied. Otherwise, they have sent it to the SC for taking it up. God save us. 

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Raja Rental Pervez’s Gift: Lights Out

Lights Out

Pakistan’s chronic power shortagesUnknown-20


Energy shortages, much like any widespread natural disaster, affect everyone within a given geographic range. Unlike any controversial government mandate, or newly passed legislation, Pakistan’s power cuts do not discriminate. When the population at large is deprived of something widely considered to be a publicly provided good, a common, anti-government animosity can easily fester, transcending social, political or ethnic boundaries.
Pakistani automechanics at a market repair a car during a power shortage in Islamabad late 16 January, 2010.

Pakistani automechanics at a market repair a car during a power shortage in Islamabad late 16 January, 2010.

Pakistan is no stranger to power shortages. For the better part of the past decade, the country has been battling endemic energy droughts, as both consumer purchasing power and demand for electric goods have drastically risen in tandem. Insufficiently robust infrastructure has only compounded the persistent crisis over the years, as has the country’s publicly stated mandate to reduce its dependence on oil by pursuing hydroelectrically produced energy.

With the summer season fast approaching, however, the country once again finds itself mired in an electricity shortfall so serious, its effects may extend across not only economic and social spheres, but across Pakistan’s political architecture as well. 

Experts estimate that, to date, Pakistan remains some 4,000 megawatts short of its power needs—a full one-fourth of its maximum capacity. Although it’s not uncommon to find advertisements or text-messaged promotions for electric generators, such devices are normally priced well outside of most Pakistani budgets.

All across the country, markets and storefronts are closing early, houses are dark, and, for an estimated six hours per day, a wide swath of Pakistanis are disconnected from the world.

The pernicious impact on Pakistan’s economy, therefore, is all too self-evident. A 2008 report from the Pakistan Institute of Development Economics estimates that power outages have decreased output by 25 percent across textile factories in the province of Punjab, where much of Pakistan’s textile industry is concentrated.

Meanwhile, governmental response to the energy shortfall has often been heavy on rhetoric, but noticeably light on results. In 2009, Federal Minister for Water and Power Raja Pervaiz Ashraf boldly predicted that the country would enjoy steady access to power by the end of the summer, thanks to a slew of new plant facilities that were making their way down the pipeline.

In April, Prime Minister Yousef Raza Gilani unveiled an ambitious new energy policy, aimed at limiting individual power usage in a wide array of consumer and domestic settings, including neon-lit storefronts and wedding halls.

As the BBC reports, the country’s leaders are also looking into alternative sources of energy, in addition to the hydroelectric-generated power upon which most of the country relies. It has even been reported that the administration may choose to explore nuclear power as one such alternative.

The PM has also promised that his government will grab the crisis by the horns, and has assured that his administration will do everything within its power to further tighten usage quotas. With this new plan alone, officials are hoping to save an estimated 1,500 megawatts per day.

As Gilani bluntly affirmed, “We are taking these decisions in the best national interest.” For the average Pakistani consumer, however, results won’t be apparent until the lights are back on—and until they stay on.

Moreover, by taking such a proactive, top-down approach to tackling the shortage, Gilani and his government are implicitly assuming responsibility for the predicament. The onus is now on the country’s political leaders to not only save power, but to begin work toward installing newer, more sustainable infrastructure within its energy sector, in order to allow Pakistanis greater autonomy over their consumption patterns.

As history has taught us time and again, whenever a palpable miasma of discontent begins wafting through the streets and airways of a sovereign nation, political upheaval is never far behind. Economic hardship breeds social antagonism. And more often than not, that antagonism manifests itself in political tumult.

Some frustrated citizens have already begun voicing their displeasure with the outages in Pakistan, having vandalized cars and other personal property in protest. Time will tell whether or not the governmental leaders are able to douse these flames of acrimony, but the mere fact that citizens have begun taking to the streets in defiant action is still an ominous harbinger, by any country’s standards—and even more so in Pakistan.

A state historically plagued by its fractious ethnic and social composition now finds itself firmly entrenched within a decidedly more Manichean political landscape. At a very cursory glance, Pakistani politics has suddenly become substantially more binary, with upset citizens on one side of the aisle, and elected officials making promises on the other. But should Pakistan’s leaders fail to deliver solutions—and fail to do so quickly—the pupa of public restlessness may soon blossom into a full-blown, political pestilence.

Energy shortages, much like any widespread natural disaster, affect everyone within a given geographic range. Unlike any controversial government mandate, or newly passed legislation, Pakistan’s power cuts do not discriminate. When the population at large is deprived of something widely considered to be a publicly provided good, a common, anti-government animosity can easily fester, transcending social, political or ethnic boundaries.

It would be easy to write off Pakistan’s problems as part of the inexorable and often painful process of development. The country need look no further than next door in India, where, despite having enjoyed sustained and robust economic growth for the better part of two decades, the country still struggles mightily to develop public infrastructure efficient enough to keep up with its burgeoning economy and population. China, meanwhile, has likewise risen to the upper echelons of the world’s economic strata, yet continues to swim upstream against many of the same infrastructural growing pains.

The difference between Pakistan and India, China, or any other mid-level developing country, however, is that the majority Muslim nation’s political might is already stretched thin on one major international front.

It’s no secret that Pakistan is crucial to US military and intelligence operations in Afghanistan, and, according to many reports, the Obama administration has made significant progress in stabilizing the notoriously tumultuous Islamic Republic.

Any domestic discomposure spurred by energy-starved Pakistanis, however, could undermine that progress, effectively throwing a major wrench into the machinery powering the coalition-led war against Al Qaeda and the Taliban. The US, apparently aware of these potentially dire consequences, has already promised more than one billion dollars in energy aid to its critically important ally, through modernized distribution systems, as well as upgraded thermal and hydropower plants.

At this point, however, there’s no end in sight, and as the situation escalates, there’s no telling which party or faction could seize the issue, and use it to their own political gain. And with the impending summer heat raising tempers in concert with the thermometer, it’s impossible to predict how an exasperated voter constituency might respond.

Given the protean political and social winds that have blown across the country in recent years, however, injecting even the slightest modicum of uncertainty into such a brittle body politic is enough to raise the eyebrows of leaders from Islamabad to Washington. 

Electricity, in and of itself, may not be as fundamentally crucial a consumer need as say, clean water or food. But in today’s hyper-industrialized social and economic ecosystem, it’s more or less essential. And if the Pakistani government doesn’t act quickly to provide it on a level that measures up to contemporary standards, it may be “lights out” for many of the country’s incumbent leaders. 


Amar Toor – Freelance journalist and former consultant in the Trade and Agriculture Department of the Organization for Economic Cooperation and Development (OECD)




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The Economist: Pakistan’s energy crisis


SUMMER in the plains of Pakistan is excruciating enough without the added joy of 20 hours of power cuts a day. Earlier this month protesters in several towns in Punjab, Pakistan’s wealthiest province, smashed windscreens, blocked motorways, shut down markets and set fire to the offices of parliamentarians and an electric utility. They clashed with police who brought out handcuffs and tear gas and fired live rounds in the air.

It was a reaction to electricity shortages that had plunged parts of the province into darkness and scorching heat. At one point the gap between supply and demand hit 7,500 megawatts (MW), or nearly 40% of national demand.  

Under the current government, the power sector has neared the top of a list of security, political and foreign-policy problems that includes some heavyweight contenders. Last week’s confluence of events once again underlined how easily Pakistan’s power sector can slip into collapse. The system’s many weaknesses find it all too easy to conspire. Cool weather in the north meant a reduced flow of hydroelectricity. Demand shot up as summer temperatures further south soared into the forties and air-conditioners strained to keep pace.

Lights+OutMeanwhile, several private power producers had to halt or slash production because the state-run power purchasing company hadn’t paid them. They had not been able, because the biggest consumers (especially provincial and federal governments) had not paid their own electricity bills. The bills that were paid are not enough to cover the cost of generation.

This so-called “circular debt”, currently about $880m, is an ongoing problem. The government usually bites the bullet, as it did this time, by paying off a portion when power producers are about to sue for default, enabling them to start generating again—for the moment. What remain unaddressed are the structural issues that cause the debt to pile up again: poor recovery of dues (receivables stand at $4 billion), electricity theft, transmission losses, reliance on imported oil and politically sensitive subsidies for certain groups. Perpetuating all of this is a lack of efficiency and co-ordination across a maze of state-owned agencies including a power purchaser, distribution and generation companies, a regulator and various ministries. The gap between the effective cost of generation and payments received is estimated at $12 billion over the past four years.

Riots over power shortages in Pakistan are not new. But this time the protests flared up against a unique political background: that of a prime minister’s conviction. On April 26th Yousaf Raza Gilani was declared guilty of contempt of court for refusing to re-open various corruption cases pending against Asif Ali Zardari, the president. In response, the Pakistan Muslim League-Nawaz (PML-N), the main opposition party, claimed the prime minister stood disqualified and started calling for his resignation in parliament and through public rallies.

For PML-N chief Nawaz Sharif, then, the power crisis could not have come at a better time. His party does run the Punjab government, but that has not stopped him trying to shift the blame onto the federal government. His parry is not merely rhetorical; Punjab relies on the centralised distribution of energy generated by resources in other provinces. Mr Sharif’s brother, the chief minister of Punjab, joined the power protests in Lahore.

At stake is more than just the fate of this particular government. If Mr Gilani makes it through the budget on June 1st and to elections next year, he will be the first elected prime minister to complete a five-year term. That would mark an historical achievement in the country’s constantly interrupted democracy.

But the disruption of lives and livelihoods may now have gone too far for the anger to confine itself to just one set of politicians. In the town of Vehari, rioters burned the offices of lawmakers belonging not only to a ruling coalition partner (which has threatened to quit the government over the issue), but also the PML-N and the Pakistan Tehreek-e-Insaf, the party of Imran Khan, who positions himself as the country’s only hope for change. Pakistan’s politicians might find they need to start addressing this issue, not just politicising it.

(Picture credit: 

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