This is the second and final part of the article. You can read Part I here 

The Ministry of Water and Power on September 9, 2013, requested TI Pakistan to “review critically the contents of revised PC-1, contract agreement and Amendments 1 & 2 to highlight discrepancies and make suggestions, if any, to save taxpayers’ money.”

Comment: How a review by TI could save taxpayers money is rather funny, because by this time the revised contract had already been rather hastily been signed and awarded to Dongfang Corporation. Moreover, rather than getting the same audited by own institutions like Auditor General of Pakistan (AGP) the job was assigned to TI. In any case getting a contract agreement reviewed after it had already been signed and implemented in order to save taxpayers money is obviously an afterthought and is like placing the cart before the horse. The only purpose being served by such an exercise can be to hoodwink the public by obtaining a clean chit from an apparently independent organization like TI Pakistan.

Violation of PPRA rules in award of contract

In its letter addressed to the Prime Minister and the Minister of Water and Power, TI Pakistan said the Ministry of Water and Power awarded the engineering, procurement and construction (EPC) contract to Dongfang Electric Corporation, without inviting tenders, in violation of Public Procurement Regulatory Authority (PPRA) rules.

Comment: TI Pakistan clearly stated the contract was awarded by the Ministry of Water and Power (i.e., the Federal Government) in violation of PPRA rules. Here, a factual discrepancy which needs mention is that the project contract (revised PC-1) was awarded by the Federal Ministry of W&P, which now was of PML-N and not the PPP. Thus, this time PML-N is to be squarely blamed for negligently amending the original contract and squandering public money by sanctioning an unnatural increase in the cost of the project and then raising an unnecessary hue and cry against the previous Federal Government. Quite obviously the purpose served was to deceive the public.

TI Pakistan’s acceptance of failure to carry out cost audit

This was also against the decision of the Economic Coordination Committee (ECC), which said provisions of Public Procurement Rules 2004 should be kept in view in the bidding process. It said in its report, TI Pakistan has critically reviewed the contents of revised PC-1, contract agreement and Amendments 1 & 2 to the provisions. And, it has not carried out any cost audit.

Comment: Here the Transparency International has clearly stated that no cost audit was carried out, thus the whopping cost escalation can neither be explained nor justified. Also, bidding process without following the PPRA Rules and in violation of the decisions of the ECC is questionable besides being unlawful. By not carrying out the cost audit the TI’s review of the Revised PC-1 carries no real value and is a sham exercise to say the least.

Preposterous claim by TI Pakistan about reviewing Ministry of W&P’s determination of cost variation in revised PC-1

TI Pakistan, however, reviewed the process adopted by the Ministry of Water and Power in determining cost variation in the revised PC-1 amounting to Rs58.416 billion, which was proposed in January 2013. The process was in line with the terms of the contract agreement reached with the contractors and also complied with government rules.

Comment: The contention of TI regarding the process of determining cost variation being in line with terms of the contract agreement is not credible and cannot be accepted unless the contract agreement is open to inspection to the public. Surprisingly, instead of saying that the process was in line with existing Government Regulations and PPRA Rules, the TI said that , ‘it was in line with the terms of contract agreement reached with contractors’, which is meaningless, rather preposterous. This is plainly doublespeak! Moreover, by not even mentioning and commenting on the astounding increase of the project cost from Rs.23 billion to Rs.58.416 Billion in the revised PC-1 ,i.e., an increase of Rs.35.416 Billion when more than              95 % the project construction had already been completed in 2010 (as mentioned earlier) and only the installation of machinery lying at Karachi Port was to be done, the TI has purposefully tried to give a clean chit to the government by ignoring this unbelievable increase in expenditure which renders the whole project financially unviable. And, this is no less than a criminal waste of national wealth and a financial and economic disaster.

Frivolous observation by TI Pakistan              

The TI stated that an increase of Rs21.208 billion in the cost in the revised PC-I had to be paid even if the project would have been completed on time. 

Comment: This increase has been mentioned by TI without giving any reference to its bonafides. The question arises as to wherefrom has the TI got this figure of Rs.21.208 billion when this is nearly equal to the actual contract amount. This is an absolutely frivolous and unacceptable figure and clearly given to obfuscate the matter in order to justify what can be termed as a daylight robbery!

Glossing over of project costs increase by TI Pakistan

TI says that according to the revised PC-I, additional payments of Rs12.325 billion are being made to the contractors, of which compensation for the delay is Rs6.538 billion and the cost of additional work items is Rs5.787 billion.

Comment: The TI has failed to explain that if these additional payments are justified then how come the cost of the project increased to Rs. 58.416 billion rather than Rs.35.837 billion. Thus, Rs. 22.579 billion (Rs.58.416 billion-Rs.35.837 billion), is nothing but a ghost payment for nobody knows what expense. Here the point to note is that we are talking of billions i.e., thousands of millions and not just a few millions. Isn’t it something             about which all economic and financial experts should be holding their heads in awe?

TI Pakistan report a cover up

Further, TI Pakistan says that the exchequer has suffered a loss of Rs13.837 billion because of the delay caused by the Ministry of Law and Justice. And, that the project cost estimated at Rs58.416 billion is based on the rupee-dollar parity of Rs96 and the final cost after completion of works is likely to cross Rs60 billion on the back of currency fluctuation.

Comment: Again, the question arises that how did the cost of the project reach Rs.58.416 billion when the loss due to project delay by Min of Law & Justice is Rs.13.325 Billion? If this was the loss then the revised project cost should have been Rs.23+13.837=36.837 billion and not 58.416         billion. This shows that the TI report was a planned cover-up of this whole shady exercise! Is it not funny that an organization like TI Pakistan is not able to do simple arithmetic? Or does it speak of something else?  

Naïve comments by TI Pakistan

The TI Pakistan further says that according to Amendments 1 & 2, the capacity of the project – a combined cycle power plant – is 425MW, and not 525MW. Enhancement of gross capacity by 25% from 425MW to 525MW with gas fuel is very ambitious.

Comment: This obviously is a needless comment which gives no reasoning or explanation as to how can the increase in capacity to 525 MW from 425 MW be termed 'ambitious'. Here, the TI is simply trying to prove its aggressive approach, when actually the TI should have pointed out at the non-feasibility of running an ‘oil fired’ 425 MW  power plant simultaneously with a gas turbine as this PC- 1 was suggesting, rather than giving naïve comments. Anyhow, since this was purely a technical point it should have been addressed by technical experts.

Tailpiece

Like the plethora of news reports about the Nandipur Project the news printed in the Dawn on Page 18, April 23, 2017, informs us that the 525 MW Nandipur Power Plant having been finally converted to Regassified Liquified Natural Gas (RLNG) has started a test run as told by the MD of SNGPL Amjad Latif to Dawn on Saturday April 22,2017. As per Wikipedia, the Nandipur Power Plant had been operational since July 2015 and was operating on furnace oil but was not able to produce at capacity. Further, following conversion to LNG the plant will produce an additional 100 MW increasing its capacity to 525 MW. In order to shift the plant from furnace oil to LNG, an 88 km pipeline was laid, and the conversion besides increasing out will also reduce operating costs. Further, Wikipedia report say that the conversion plans to shift fuel source and increase capacity came to light in February 2017 when a ‘long-term operation and maintenance agreement’ for the plant was signed with Northern Power Generation Company Limited (NPGCL) and MS Hydro Electric Power System Engineering Company of China ( HEPSEC) for a period of ten years. At present, the Nandipur Power Plant is running on LNG on a testing basis, which will continue till May 1, before it launches the commercial output officially, the sources reported.

Like all the previous claims of success regarding this project, this claim should also be taken with a pinch of salt, as it again involves disinformation to keep the public confused and happy about the development ‘exploits’ of the current rulers. The most unbelievable point is that how has the whole plant been converted to run on LNG when the agreement signed with the Chinese company is supposed to be a “long term operation and maintenance agreement” and not an “engineering contract” for conversion of the whole plant i.e., including the four turbine “oil-fired” turbines into “gas fired”. Since, the addition of fifth “gas fired” turbine was part of the Revised PC-1 to increase the total output to 525 MW from 425 MW as already discussed above. Moreover, as far as the laying of the 88 km pipeline for transporting LNG is concerned this was an additional project sanctioned following the sanctioning of the Revised PC-1 which further increased the cost of the project from Rs.58.416 billion Rs.65 billion.

Thus, the actual story will remain shrouded in secrecy and the actual outcome of this latest report will most probably remain out of public knowledge. Obviously, the actual shock of further expenditure to convert original first four ‘oil fired’ turbines into ‘gas-fired’ turbines is being withheld for the time being so that public memory doesn’t wake up suddenly.

Conclusion

I would like to curtail my observations at this stage and would refrain from discussing any further the statements made by the CM Punjab, the Federal Minister of Water & Power Khawaja Asif, and/or other PML-N bigwigs regarding the damage done to the national economy by the previous PPP Government. As they all involve empty political rhetoric and fall in the category of wild and noisy tantrums to hide their own culpability in shirking responsibility in this whole sordid business. I would dare say that the most worrying aspect of such financial bungling by our political masters is the resultant colossal haemorrhage of the national exchequer due to their overindulgence in practicing their development fantasies which they choose to call Mega Development Projects. But the more alarming fact is, that none of those charged with managing the national institutions of accountability including the FIA, NAB, Office of the AGP nor the Public and Private Civil Institutions like the Pakistan Engineering Council (PEC), various institutes including civil and electrical engineers etc, or other Federal Government Regulatory Agencies, can be credited for having displayed the courage or patriotic sense to question this culture of untrammeled loot and plunder of national wealth and resources. Also, the flagrant violation of all the established standards of honest and responsible governance at the national and provincial level seems to have become the norm rather than the exception.

A  very notable observation with regards to the new projects whether in the power or the construction sector is that no project bigger than a kilometer length of road or some flyover/underpass, or a small hydro or thermal power project of a few megawatts has a price tag of less than a few billions of rupees! While, slightly bigger projects of above ten kilometers or plus 50 megawatts have cost estimates ranging from minimum 25 billion to multiples of 25 billion! Yet, the funny thing is nobody seems to bother about their exaggerated cost estimates and no questions are asked. An interesting observation which needs to be mentioned is that from time to time different figures are quoted by the Government sources regarding the costs of various projects so that people should keep guessing about it and thus find it difficult to contest it with the authorities concerned. For example: the cost increase in the Revised PC-1 as given by Government sources increased from Rs. 23 billion to Rs.57.38 billion; the cost increase quoted in the report by TI Pakistan is Rs.58.416 billion. It's almost as if a billion rupees here and there doesn’t matter!

Here, I would leave this as a food for thought for all the experts in various fields of development to determine the amounts and possibilities of kick-backs and commissions which the unscrupulous and corrupt elements would be receiving and at what cost to the country and its people? Obviously, if the contract for any project which should not be costing more than a couple of or ten billion rupees at the maximum (in actual), is signed for ten or fifty billion rupees and more, or of equivalent value in dollars, the kick-backs or commissions at least equal to the actual cost would be no big deal for a foreign firm to safely deposit in the overseas account of the project initiator without any inkling to anyone. With due respects the Chinese, Germans and Americans and now even the Turks are quite infamous in this respect, especially when the contracts are actually being doled out to private contractors! And, when the projects are backed by sovereign guarantees and concessional or tax-free status such suspicions are further strengthened, especially if the contract documents are kept confidential and out of public scrutiny!

Also, I would ask those who have a duty to protect national financial and economic interests to please open their eyes and stand up for preventing the motherland from sliding further into the quagmire of poverty and risk losing her independence. It is high time to realize that in government to government contracts backed by sovereign guarantees, especially to private foreign contractors, the talk of money laundering is now a thing of the past or a misnomer at best. This is certainly no flight of imagination or make believe but a stark reality especially where third world countries are concerned, certainly those who are on the brink of falling into failed states category. No amount of chest beating or clamour of being Islamic and progressive will halt this slide into the gutter if those who consider themselves to be educated and patriotic do not wake up and rise to the occasion.