Cabinet ratifies ECC’s decision to discharge pending liabilities of Power Division

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ISLAMABAD: The federal cabinet has ratified the Economic Coordination Committee’s decision to discharge liabilities of the power division related to M/s Karkey arbitration in International Center for Settlement of Investment Disputes (ICSID) by approving a technical supplementary grant worth $1,415,090.15. 

According to sources, the federal cabinet has ratified the decision of ECC, dated 18th August 2020, to discharge the unresolved liabilities related to M/s Karkey Karadeniz Elektrik Uretim (KKEU) arbitration in ICSID against Pakistan. 

The sources said that approval of the technical supplementary grant of $1,415,090.14 is for discharging liabilities for payment of legal fee and other payments on account of international arbitration. 

According to the documents available with this scribe, the ECC had approved $1.5 million as a supplementary grant to discharge liabilities related to the legal fee to the counsels hired on behalf of Pakistan for arbitration case and the cabinet had ratified the said decision of ECC on April 20, 2020.

However, the allocated supplementary grant could not be utilized in due time and subsequently lapsed owing to the lengthy and cumbersome release mechanism. 

After completion of all requisite procedure and formalities, the Accountant General Pakistan Revenues (AGPR) intimated that the payment could not be executed due to closing of interbank market on June 30, 2020. Consequently, the seal authorities may be treated as withdrawn/cancelled.     

Sources said that the attorney general for Pakistan office had requested the power division to discharge the liabilities of foreign counsels hired on behalf of the state for arbitration case at the earliest but the power division did not have sufficient finances required to meet its obligations.

KKEU was one of 12 rental power companies that had been awarded contracts by the Pakistan Peoples Party (PPP) government in 2008-09 to ‘resolve’ the power crisis.

A ship was brought to Karachi port in April 2011 to provide electricity to the national grid under the then government’s Rental Power Plants (RPP) policy to overcome the energy crisis.

However, it failed to generate 231 megawatts (MW) as was required under the agreement, even though $9 million had been paid to the company in advance as capacity charges.

It is pertinent to mention that the plant had reportedly produced only 30-55MW of electricity and that too at a cost of Rs41 per unit, which was a serious breach of contract.

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