THE ONGOING TUSSLE BETWEEN WAPDA/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 principles.
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 spirit.
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.