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Ministry asks ECC to waive Rs 1 bn KPT dues against Wapda

ISLAMABAD: The Water and Power Ministry has asked the Economic Coordination Committee (ECC) of the Cabinet to authorise waiver of KPT dues of just over a billion rupees outstanding against Wapda.

The amount which is payable by Wapda to KPT is on account of demurrage charges on equipment imported for Chashma hydropower project but never lifted as Wapda was first unable to pay the Customs duties, and the demurrage after Customs liability of billions of rupees was deferred.

Wapda has defaulted on different payments in the same transaction on at least four occasions. The Authority has failed to pay the amount for the past 28 months now.

Official sources told Fortuna that after having extracted, from the ECC and the former prime minister, Nawaz Sharif, several exemptions in the same transaction and having failed to discharge even the reduced liability, Wapda is now asking for an outright waiver of the billion-rupee liability.

Wapda is justifying its request on the basis of its ailing financial health.

The water and power ministry's request is couched on the sole ground that the present crisis emerged when Wapda had to pay $24 million (Rs 1.302 billion) from its own resources to one of its contractors on the Chashma hydropower project.

This amount of Rs 1.3 billion was spent on the purchase of "dollars from the open market to repay loan taken from the Citibank on 2-9-1994 for the financing of EM-1 contract," states a summary presented to the ECC.

The ministry of water and power has intimated to the ECC that Wapda is the implementing agency for the Chashma hydropower station (184 mw).

Sources quoted the Power Ministry as saying that the project was approved by the Executive Committee of the National Economic Council (Ecnec) in its meeting in June 1994 with a total cost of Rs 10.56 billion with foreign exchange component of about Rs 6.2 billion.

Sources said that the contract for civil works of the project was awarded to three foreign firms, named Hyundai of Korea, Marubeni of Japan, and CEGELEC of France. Marubeni was the firm that won the contract for EM-1 contract.

At the time of signing the contract Wapda had agreed to provide financial assistance to Marubeni for payment of Customs duties, sales tax, etc., to get the equipment cleared from Karachi Port Trust (KPT) and its transportation to the site. But Wapda failed to fulfil its contractual obligation. Consequently, the material arriving at KPT started piling up resulting in heavy demurrage charges imposed by the KPT.

In September 1997, under the directive of Nawaz Sharif, the Customs duties were deferred by the CBR.

Sources said that the prime minister's intervention also failed to secure the release of the equipment as KPT insisted that Wapda must pay demurrage charges first.

Wapda took the matter to the ECC, which decided, in its meeting of November 2, 1998, that Wapda should pay the dues on account of storage charges to KPT in four equal instalments by June 1999. However, Wapda failed to pay even the first instalment.

In December 1998, the ECC accorded approval for the release of equipment by KPT without linking it to payment of the first instalment of the storage charges and the material was then accordingly released.

Sources said the Ministry of Communication again moved the case for payment of demurrage charges amounting to Rs 1001.34 million before the ECC. Wapda explained its financial constraints and its inability to pay the demurrage charges, but the ECC in its meeting held on February 2, 1999 decided that Wapda should pay the charges to the KPT in three equal quarterly instalments of Rs 333.78 million starting from December 31, 1999.

Wapda defaulted again

Giving reasons behind its default on payment of these instalments to the KPT, sources quoted the Ministry of Water and Power as saying to the ECC that a loan agreement amount to Japanese 13 billion yen was signed between Pakistan and Citibank NA Japan on 2-9-1994 for financing the EM-1 contract. As the project could not be completed by the loan disbursement date of 2-9-1998, the bank terminated the disbursement of balance amount of Japanese 7 billion yen that resulted in the piling up of contractor payments for works done.

Wapda was left with no option but to pay $24 million (Rs 1.302 billion) from its own resources to Marubeni by purchasing $ from open market after obtaining approval from the Finance Ministry and the State Bank of Pakistan. This payment further deteriorated the financial position of the Authority. Furtuna