News

1,100mw Kohala hydel project: Wapda, AJK Prime Minister lock horns (Part 2)

Business Recorder

May 9,2011

Wapda through its letters of June 8 and November 18, 2010, conveyed that in December 2005, on Wapda 's request for development of the project in public sector was approved by the GoAJK and subsequently approved by the Executive Committee of National Economic Council (Ecnec) on August 23, 2006. Accordingly, Wapda had completed feasibility studies of the project and, detailed engineering design and tender documents by November 2009. Wapda further contended that approval of Ecnec was based on approval of Government of AJK permitting it to develop the project in public sector and there was a legal requirement for de novo approval from the Government of AJK. Moreover, PPRA Rules were applicable since the feasibility studies and detailed engineering design and tender documents were fully financed out of public funds. In addition to that, Wapda had also assessed that the cost of the project worked out by the sponsor was higher by $ 344.32 million than cost estimations by Wapda. Therefore, awarding of project to CWE was a violation of PPRA act; so the project be offered through International competitive bidding (ICB). Conversely, the PPIB is of the view that since the project is being implemented on 'Build, Own, Operate and Transfer' (BOOT) mode in the private sector within the territorial jurisdiction of AJK, pursuant to the AJK interim Constitution 1974, the AJK Council has the exclusive competence, powers and jurisdiction to exercise 'Executive Authority' in relation to the subject of electricity. Accordingly, the AJK Council through its letter dated 31st July 2009 approved the development of the Project through PPIB in accordance with the terms of the MoU. As far as the applicability of PPRA Rules is concerned, PPIB is of the opinion that such Rules are not applicable on the following grounds; (i) project is being implemented in the territories of AJK under the laws of AJK wherein the AJK Council has exclusive territorial, constitutional and legal rights, competence and jurisdiction; (ii) project is not financed either wholly or partly out of 'public funds' (as such term is defined in PPRA Ordinance 2002) and therefore PPRA Rules are not applicable as no taxpayers' money or guarantees are involved for its financing and any costs incurred by Wapda in carrying out the feasibility studies and the detailed engineering, design and tender documents shall be reimbursed by the sponsor; (iii) project is to be entirely funded (after financial and technical due diligence of project costs carried out by Nepra on touchstone of economic procurement and prudence of costs) through project financing/private capital on non-recourse basis by project company with the participation of international investors and lenders; and or (iv) implementation of the project through CWE is pursuant to a binding and enforceable MoU and being an international obligation or commitment of the GoP provides primacy to such obligations or commitments if in conflict with the PPRA Rules as recognised by Section 5 thereunder. It is pertinent to add here that the former Prime Minister of AJ&K in a letter addressed to the Prime Minister of Pakistan on July 5, 2010 had conveyed that :- "In light of the above situation, it is proposed that the subject project may be withdrawn from private sector as it was handed over to private sector in contravention of Power Policy 2002 and Wapda should be authorised to develop this project with the collaboration of Government of Azad Jammu and Kashmir." Most recently, the Prime Minister of AJ&K wrote another letter to Prime Minister Gilani, saying that keeping in view the supreme national interests, the Go AJ&K is issuing letter of support (LoS) to CWE, who have given firm commitment to bring $2.5 billion to development 1100 MW Kohala hydropower project in the soonest possible time to meet energy shortfalls in the country". The Ministry of Water and Power has submitted two options to the ECC, as follows: (i) the decision of the AJ&K Council may be concurred for development of 1100 MW Kohala Hydropower Project under policy for power generation 2002 as per opinion given by Ministry of Law Justice and Human Rights and; (ii) or the project may be awarded as per PPRA rules 2004.

Copyright 2010 TI Pakistan. All Rights Reserved.