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Thursday March 28, 2024

Circular debt’s payment irregular: AGP

By Ansar Abbasi
December 15, 2015

ISLAMABAD: In his special report sent to the President of Pakistan, the Auditor General of Pakistan (AGP) has held circular debt payment of Rs368 billion to Independent Power Producers (IPPs) as irregular and in violation of laid down procedures.

Presidency sources told The News that the payment should have been made through the Accountant General Pakistan Revenue (AGPR) but the government ignored the pre-audit system and paid the amount to the IPPs through the State Bank of Pakistan (SBP).

The report, which pointed out certain other serious flaws causing loss of billions of rupees, will be sent to the National Assembly Secretariat for its presentation before the Public Accounts Committee (PAC) for discussion.

According to the sources the AGP noted that the Finance Ministry violated the set procedures while making payment of Rs368 billion to the IPPs as it ignored the AGPR.

The Finance Ministry in its reply to the AGPR maintained that payments have been made through the SBP even in the past. However, the AGP did not approve of this justification and left the matter for the PAC to decide.

The AGP said that while making the total payment of Rs480 billion to clear the circular debt, the Finance Ministry did not adjust/ deduct Rs23 billion which the IPPs were to pay to the government on account of liquidated damage.

The Finance Ministry in its reply to the AGP said that this deduction was not because of pending litigation on the matter.

The AGP also pointed out that the payment made to clear circular debt include Rs22 billion as surcharge for late payment. This is a loss to national exchequer.

It is also pointed out in the AGP report that Rs7-8 billion loss has also been incurred because of government’s failure to provide gas fuel to the IPPs.

The special report on circular debt also noted that Rs6-7 billion that was collected as GST from the IPPs was refunded to the private power houses.

Soon after coming into power the PML-N government made payment of Rs480 billion in two instalments to power sector to settle circular debt.

In 2014 the then AGP had said that the payment of Rs480 billion circular debt to power sector by the Ministry of Finance was illegal and in violation of laid down rules and procedures of releases by the government.

The then AGP Muhammad Akhtar Buland Rana had informed the PAC that any releases in the past made by the Ministry of Finance without fulfilling pre-audit conditions were illegal and in violation of rules and regulations of the government.

Buland Rana had stated that the Finance Ministry did not take out releases from consolidated funds without pre-payment verification. He said it is a law of the land that funds could not be withdrawn without verifications and in such cases the element of favouritism could not be ignored.

The AGP further said the SBP was also bound to follow the due rules and regulations in direct releases, and a possible reason behind the resignation or termination of former SBP governor could be this ‘violation’.

After the departure of Buland Rana, the present AGP conducted a special audit and found the payment made to settle circular debt as irregular.