Pakistan defers probe into private power sector's alleged wrongdoing

ISLAMABAD, May 5 (Reuters) - Pakistan on Tuesday deferred for two months an inquiry into suspected contract violations by independent power producers which may have cost the national exchequer billions of dollars.

Hobbled by decades of energy shortages, successive Pakistani governments have pursued private sector investment in power production, offering lucrative returns backed by sovereign guarantees.

Prime Minister Imran Khan’s government ordered late last month the investigation into the IPPs’ contracts after he was presented with a 278-page report by a government committee which outlined a number of alleged transgressions.

However, a cabinet meeting Khan chaired on Tuesday decided to defer the probe. “In order to provide a chance of meaningful negotiations with the IPPs, constitution of inquiry commission ....may be deferred for two months,” said the meeting minutes seen by Reuters.

Information Minister Shibli Faraz said the decision was taken due to the government’s focus on measures to fight COVID-19. “We will not leave it unattended,” he told a news conference in Islamabad.

Around 40 independent power producers operate in Pakistan. Company representatives have consistently rejected allegations of wrongdoing.

Khan had also ordered the report, which alleges the IPPs made billions of dollars in questionable deals, to be made public. That too will be held up for another two months.

Some of Khan’s powerful cabinet ministers have stakes in the private power sector business.

Previous governments said the incentives, including dollar indexation and guaranteed capacity payments, were necessary to attract investors unwilling to put money into an uncertain Pakistani economy.

Up until 2017, prolonged power outages hit the country’s industrial production.

Pakistan’s energy ministry has lately been holding sessions with the IPPs after some of the report’s contents were leaked to the media, to seek “their contribution in rationalization of tariffs”.

Pakistan is now energy sufficient, but relies heavily on the private power sector.

Writing by Asif Shahzad; Editing by Emelia Sithole-Matarise