tussle between Wapda and Hubco
Hubco pleads contracts
should be honoured in letter and spirit
By AMANULLAH BASHAR
Jul 31 - Aug 06, 2000
"Nashistando Guftando Barkhastand" was the
scene when the talks between Wapda and Hubco, held in Dubai on July 22 to resolve the
tariff issue, once again ended without producing a result.
It is unfortunate that the tussle between Wapda and Hubco is going on
without realizing its fall outs on social and economic life of the country.
Pakistan being an emerging economy has to go a long way to achieve its
economic plans. More foreign investment in general and in the energy sector in particular
is a pre-requisite to hit the targets of economic growth in Pakistan. The tussle between
Wapda and Hubco has however sent negative signals to the investors. A recent meeting of
Hubco shareholders held in New York reflected the negative feelings of the potential
investors in Pakistan mainly because of the dispute.
Despite having a strong will to resolve the issue amicably, both Wapda
and Hubco are unable to reach a conclusion due to certain limitations of their own. On one
side, Hubco is unable to take a decision in isolation, as the company has to go by the
will of its shareholders and the international lenders. While on the other side Wapda
confronted with acute financial constraints due to mismanagement, corruption and huge
losses on account of transmission, distribution and power theft. Moreover it is morally
bound to provide electricity to its consumers at an affordable price.
PAGE asked a Hubco spokesman to comment on the
current situation especially about media reports that Hubco has rejected the government
new offer to settle down the issue. The spokesman while brushing aside the reports
described them as incorrect. In fact Hubco desires to resolve the issue at the earliest
but at a reasonable solution that to the satisfaction of its shareholders.
In response to the new proposal of the government, Hubco has asked
Wapda to explain a number of questions about their offer so that the offer could be better
understood, the spokesman said. As a matter of fact, Hubco has a vested financial interest
in an expeditious resolution to the Wapda-Hubco dispute.
The spokesman refused comments on the details of the offer and the
negotiations so far held between the two parties. The spokesman however observed that
Wapda's offer related to shareholders is negligible. He said that there were many
speculations about recent negotiations and meetings between Wapda and Hubco. Most of them
were speculative as no such meeting have been convened. The Hubco has once again
highlighted its fundamental principles that which if addressed would certainly help in
speeding up of resolution process, he said.
Spelling out the said principles he gave a brief account of those
This includes the right of the company to international arbitration
which is the only contractually agreed dispute resolution mechanism, he asserted.
The company's contracts should be recognized and honoured in letter and
The government of Pakistan/ Wapda should decide once and for all
whether the company is guilty or not. If not then the FIRs registered against Hubco should
be withdrawn and other coercive, arms twisting and harassing actions are stopped
forthwith. It may be mentioned that charges of corruption and meter tampering were alleged
in the FIRs against Hubco.
It is however reported that the government has given its counter offer
of tariff to Hubco by asking it to reduce its internal rate of return from 18 per cent to
3 per cent to settle the four-year old dispute.
The counter offer was however not acceptable to Hubco which has termed
the offer as inadequate and urged the government to review its proposal so that they could
reach to an amicable solution.
Reports appeared in a section of the press have alleged that Hubco has
refused to hold fresh talks with the government. It has also conveyed to the World Bank
that it was no more interested to have second meeting in Dubai. It is also said that Hubco
has rejected the government's invitation to have another meeting in Islamabad the other
day. The report quoting to a Hubco spokesman said that government has asked Hubco to have
only 3 per cent internal rate of interest instead of the guaranteed 18 per cent which is
not acceptable to Hubco's shareholders. It is further reported that a technical meeting
was being planned between the government experts and Hubco to discuss objections over the
counter-offer while the World Bank was finalizing a fresh date for another meeting between
the two parties.
Apart from Wapda and Hubco dispute, the electricity consumers in
Pakistan are yet another important part of the story. Either directly or indirectly both
Wapda and Hubco are linked with the consumers, the end users of the electricity. Unless
the consumers are made happy and provided electricity at an affordable rate the dream of
economic growth will not come true and all agreements and arguments are of no avail. One
of the solutions for supplying power at a cheaper rate is to reduce a large number of
taxes levied on electricity consumption. It is good that the government has abolished
development surcharge on furnace oil yet a formidable number of taxes still there making
the electricity charges as the highest in the region. These taxes have to be rationalized
at the earliest as a pre-requisite for speedy economic growth and a relief to the
poverty-ridden masses, if the present government is really serious to bring in the reforms
which was the main plank of their economic agenda.