Govt orders third party audit of Rs480bn paid as circular debt

ISLAMABAD: The government has ordered a third party audit of Rs480 billion given to independent power producers, generation companies and fuel suppliers to pay off circular debt.

Zargham Eshaq Khan, joint secretary of the water and power ministry, informed a sub-committee of the Senate standing committee on water and power headed by PPP’s Maula Bakhsh Chandio on Thursday that the third party audit by three chartered accountants had been ordered to address the perception of any wrongdoing.

He said the circular debt would go up again to Rs240bn at the end of the current financial year because its major causes were still there. The causes include increase in recoverable amounts of distribution companies of Wapda, more line losses than allowed by the regulator, delayed charging of fuel price adjustment, non-payment of GST refunds by the Federal Board of Revenue and delayed receipt of tariff differential subsidy from the federal government.

Mr Khan said that of the Rs480bn circular debt, Rs138bn was cleared through book adjustments in the accounts of public sector companies for clearing tax dues and debts.

Humayun Khan Mandokhel, a member of the sub-committee, said that the money wasted to clear the circular debt was more than enough to finance 4,300MW Dassu hydropower project.

During cross-examination, the sub-committee was informed that neither the audit of payments made to the IPPs had been conducted during the past five years nor any audit of National Electric Power Regulatory Authority was carried out during the period.

The meeting was told that the payments had been made to IPPs, including Nishat Group of Mian Mohammad Mansha, and some members viewed it as a conflict of interest.

Mr Mandokhel said that Mian Mansha was a close adviser of Prime Minister Nawaz Sharif and he also accompanied him on foreign visits, including a recent tour of China.

The sub-committee directed the government to inform it in writing why Nepra had not audited the payments made to the IPPs over the past five years.

Nandipur project: Senior officials of the ministry of water and power and the National Transmission and Dispatch Company informed the sub-committee that the nation suffered a huge loss of over Rs130 billion because of non-implementation of 425-525MW Nandipur project for more than five years.