TIP flags ‘serious irregularities’ in $153m Madyan Hydropower contract

ISLAMABAD: Transparency International Pakistan (TIP) has raised alarm over alleged irregularities in the $153 million procurement process of the 215MW Madyan Hydropower Project in Khyber Pakhtunkhwa, urging the World Bank to launch a probe and, if necessary, scrap and reinitiate the bidding process.

In a letter addressed to Ms Bolormaa Amgaabazar, the World Bank’s Country Director for Pakistan, TIP stated that a formal complaint had been received highlighting “serious violations” in the prequalification and evaluation process carried out by the Khyber Pakhtunkhwa Energy Development Organization (PEDO) under the World Bank-funded Khyber Pakhtunkhwa Hydropower Renewable Energy Development (KHRE) Project.

According to TIP, a joint venture was prequalified despite questionable eligibility. The watchdog alleged that one of entity, which holds 90 percent shareholding in the JV, misrepresented its corporate status by presenting itself as a private entity, whereas it is a state-owned company - something prohibited under World Bank procurement rules unless strict conditions of autonomy are met.

The letter also pointed to financial red flags. The company reportedly recorded negative cash flows for four consecutive years (2019–2022), with total revenues of just $16.6 million in 2023 - “disproportionately small for a company bidding for billion-dollar hydropower commitments.” Despite this, the firm declared profits before tax of $57.2 million in 2023, raising doubts about financial transparency.

Further, to meet mandatory financial requirements, the company submitted a support letter from a brokerage firm and not a recognised bank or financial institution, offering only a conditional $15 million facility.

“The allegations seem prima facie correct,” TIP noted, emphasising that World Bank guidelines clearly bar state-owned firms lacking financial autonomy or those under employer supervision. It also flagged concerns over the JV’s liability structure, which TIP argued contravenes the bidding rules requiring joint and several liability.

The watchdog has asked the World Bank, the Khyber Pakhtunkhwa government, and relevant oversight bodies - including the Prime Minister’s Office, the Peshawar High Court registrar, and the World Bank Integrity Unit - to investigate the matter and ensure adherence to procurement rules.

“If the allegations are verified, the World Bank must take appropriate action in compliance with its anti-corruption policies and reinitiate the procurement process,” the letter stressed. TIP reiterated that across-the-board application of the rule of law was the only way to curb corruption and ensure zero tolerance against malpractices in mega development projects.