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TIP exposes Rs100 bn extortion scam by IPPs, others

The News

June 29,2012

After the recent admission by top government officials that the electricity crisis was a self-created phenomenon and a consequence of bad governance, Transparency International Pakistan (TIP) has now revealed that the private power producing companies are allegedly involved in adding fictitious production costs to the expenses to avail additional income amounting to Rs100 billion per annum.

This alleged fictitious cost which forces the ordinary power consumers to pay more, has been an unchecked practice for the last ten years. According to AdilGillani, the TIP adviser, an influential power cartel is involved in this huge corruption with the connivance of government authorities. The TIP has approached the SECP to check this massive corruption by conducting a cost audit of IPPs and fertilizer manufacturers under Companies Cost Accounting Records (General Order), 2008. Gillani said that so far SECP too had been reluctant to perform its obligations.

While formally approaching the SECP, the TIP has also informed the Supreme Court of Pakistan (SCP), Public Accounts Committee (PAC), chairman NAB and ministers of finance, petroleum and water and power about this matter.

In his communication to the SECP, Gillani said that the TIP has received complaints that private power producing companies like KESC & IPPs and fertilizer manufacturing companies are alleged to be involved in fictitious loading of production costs, to extort additional income, as their final prices are determined by regulatory authorities, on cost plus basis, structured on their productions costs.

“It is reported that more than 50 IPPs and fertilizer manufacturers have been involved in this malpractice, and have been availing additional benefits in connivance with the regulatory authorities for the last ten years of over Rs100 billion per annum. The sale prices are determined by the relevant regulatory authorities based on the production costs submitted by these firms.” The TIP, in its complaint said that following acts and manipulations are being done by these firms to artificially inflate the production costs: 1. Furnace oil is procured with additional 3 per cent to 5 per cent mark-up paid to guarantee cover. The seller has back-to-back agreement to refund it to the procurers after retaining 0.5 per cent of this amount. 2. Operation and maintenance costs are exaggerated. 3. Monthly fee charges paid for technical services and consultancy costs. 4. Over invoicing the cost of material and goods procured. 5. Exaggerated input consumptions. 6. Subcontracting various operations at inflated costs, and back-to-back arrangements with subcontractors to refund 90 per cent of extra payments made. 7. Fictitious contracts.

The TIP asked the SECP to conduct an audit of the accounts of all KESC & IPPs and fertilizer manufactures, so that the additional costs charged by these firms, if any, are determined, and the nation gets relief by depositing in the national exchequer account all such overpayments claimed from public and those found involved in this malpractice are taken to task under the laws of land.

Source : TIP

Jo Pakistan se Jana Chahta Hai Chala Jaye: By S. Abid Gilani

Jo Pakistan se Jana Chahta Hai Chala Jaye: By S. Abid Gilani

S.Abid Gilani

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