ISLAMABAD-Auditor General of Pakistan has noted losses of around Rs 100 billion caused by the Lakhra Coal Power project due to under utilisation, financial mismanagement and design fault of the project. From its inception till 2017, Lakhra Power Generation Company Limited (Genco-IV) has incurred losses of more than Rs 100 to the exchequer, observed Auditor General of Pakistan in its special audit report 2017-18 on Lakhra Power Generation Company Limited. Generation loss of 12,768 MKWH due to under utilization of Lakhra power plant caused financial loss of Rs.76,610 million. During special audit of 150 MW Lakhra Power Station, it was noticed that the plant had generated 4,576.69 MKWH units since its installation against the utilization factor at 60% i.e. 17345 MKWH. The required specification of moisture, ash, carbon and sulphur was 32%, 19.52%, 22.30% and 5.20% respectively whereas actual specification of coal procured from M/s Lakhra Coal Development Authority was 6.6%, 30%, 28.5% and 7%, respectively. Due to this, 12,768 MKWH units were less generated which was a loss to the company.

Non-adherence to provision of PC-I resulted in laws generation of 12,768 MKWH causing financial loss of Rs.76,610 million at the rate of Rs 6 per KWH from the date of commercial operation of the plant up to financial year 2016-17. The matter was taken up with the management in May, 2018. The management replied that the very basic design of the Power Station was bad on the indigenous, locally available, low grade, Lakhra lignite (coal). The reply was not tenable as it was the management failure at the planning stage that the shortcoming like low quality coal could not be visualized at the outset of the project. DAC in its meeting held on July 19, 2018 did not agree with the management contention. As per inquiry report by GHCL dated 15-02-2017 coal quality being received at FBC Lakhra, based on fuel supply Agreement/ purchase order was not in line with design Specification. The DAC directed that the Ministry of Energy (Power Division) may send the case of LPGCL to NAB for investigation. According to revised PC-I of 150 MW Fluidized Bed Coal Filed Power Station at Lakhra cost of generation per KWH shall be 159.75 paisas. During Special audit of the Power Station, it was noticed from the E-Form that power plant did not achieve cost of generation at 159.15 paisas per KWH since the date of commissioning of the Plant 1995-96 to 2016-17 as cost of generation per KWH fluctuated between 423.04 paisas to 1943.82 paisas during this period which was very high. Therefore, the objective of cheap energy generation was not achieved.

Non-adherence to provision of PC-I resulted in loss of Rs 16234.82 million to the Company due to higher cost of generation. The matter was taken up with the management in May, 2018.The management replied that the cost of generation depended upon many factors like cost of fuel, establishment, maintenance and running at de-rated capacity. However, PC-I for rehabilitation of Lakhra Power Plant for S 20 million was submitted in October 2013 for approval which was yet awaited. The reply was not tenable as it was the mismanagement that periodic maintenance and rehabilitation of the plant could not be carried out to ensure efficient operation of the plant which needed to be justified. DAC in its meeting held on July 19, 2018 did not agree with the management contention, as inquiry conducted by GHCL had concluded tit boiler design was faulty and coal quality being received at FBC Lakhra, based on fuel supply Agreement/Purchase order, was not in line with design specification. The DAC directed that the ministry of Power may send the case of LPGC to NAB for investigation. Further program was not responded till finalization of this report. Audit recommends the management to comply with DACs decision and also investigate the matter for fixing responsibility of loss upon the person at fault.

The audit also observed financial loss of Rs 10795.68 million due to poor operation and maintenance of Lakhra Power Generation Company. According to the instructions issued by WAPDA dated July 17. 1982. “all loses whether of public money or of stores shall be subjected to preliminary investigation by the officer in whose charge they were, to fix the cause of the loss and the amount involved”. During the specie audit of 150 MW Lakhra Power Station it was noticed that Lakhra Power Generation Company sustained loss of Rs 10,795.68 million as on June 30,2017.

The reasons for the loss were lesser energy generation, substandard coal, high heat rate, financial charges of M/s Karkay, high cost of establishment, poor operation and maintenance of plant, frequently forced out-ages of the Plant etc. This loss had been increasing on yearly basis which was unaffordable for the Company. Poor operational management resulted in financial loss of Rs 10.795.68 million up to June 30, 2017 to the company’s exchequer. The matter was taken up with the management in May, 2018.

The management in its response attributed to the lapses to use of low grade coal, non finalization of privatization and leasing process and subsequent Supreme Court’s setting aside the decision of High Court and also the transaction of leasing. Audit recommends the management to comply with DAC’s decision and investigate the matter for fixing the responsibility regarding huge loss sustained by the Company. Lakhra Power Generation Company suffered from design and maintenance issues since its operation in 1995, resulting in low power generation.

Deteriorating Power Generation increased cost of generation which reached highest level in 2012-13 at 1943.82 paisas per KWH against PC-l cost of 159.75 paisas per KWH. The company‘s accumulated losses from 2002 to 2017 have reached to Rs. 10,795.68 million. If the company is allowed to continue its operations, losses are expected to increase and will burden the national exchequer. The dismal performance of the project due to non-achievement of its objectives has raised doubt on the company’s ability to continue as a going concern.

The audit recommended that the matter regarding mismanagement and financial indiscipline causing loss of Rs. 10,795.68 million and less generation of 12,768 MKWH causing loss of Rs. 76.610 million needs to be investigated for faxing responsibility upon the persons at fault. The malfunctioning of the plant since its inception resulting in constant loss has made the project unviable. Measures may be taken to prevent further losses from the project.