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Dispute over hiring an arbitrator remains

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ISLAMABAD:

The federal government has stepped up efforts to transfer shares of K-Electric to Shanghai Electric Power of China, but disputes have not been resolved over the appointment of an arbitrator to deal with the issue of claims and claims. debts.

An application for a national security certificate for the transfer of 66.4% of the shares of K-Electric to Shanghai Electric Power was submitted to the Privatization Commission in November 2016.

Subsequently, stakeholder meetings took place in different forums. The Cabinet Committee on Privatization, when it met in March 2018, agreed that the National Security Certificate would be issued but that K-Electric would bear all of its existing financial liabilities.

Shanghai Electric did not agree to this proposal and the issue has not been resolved since.

Sources told the Express Tribune that an inter-ministerial committee must decide which ministry – finance or energy – to sign an arbitration agreement on behalf of the government of Pakistan. K-Electric insists that a foreign arbitrator should be appointed, but government stakeholders disagree with this.

When Pakistan Tehreek-e-Insaf (PTI) came to power, the Economic Coordination Committee (ECC), at its meeting on October 2, 2018, formed a committee, headed by the Prime Minister’s Advisor on Trade.

The committee met on October 25, 2018 and ordered that a Deed of Understanding (DOU) be signed with Shanghai Electric and a Deed of Extinguishing (DOE) with KES Power.

Before any further deliberation, another interministerial committee was formed in December 2018, headed by the Minister of Privatization and made up of other ministers and secretaries concerned.

During its meetings, the committee expressed the wish that an agreement be reached between the stakeholders concerned on the DOU and DOE project. The Electricity Division proposed that the issue of debts and claims to government and public sector enterprises could be resolved through arbitration.

At a meeting of relevant ministries in October 2019, it was agreed that arbitration was an appropriate mode to resolve the issue of K-Electric’s debts and receivables.

Later, another key meeting between stakeholders, co-chaired by the ministers of privatization and energy, was held on February 24, 2020 in which four main actions were identified to move the file forward.

With respect to claims and debts, it was recommended that the issue could be resolved by arbitration and that all parties concerned should appoint their representatives to negotiate the terms of a proposed arbitration agreement.

A draft arbitration agreement was widely approved at stakeholder meetings in June 2020, except for a few differences of opinion.

Prime Minister Imran Khan also led the Minister of Planning, Development and Special Initiatives to resolve the outstanding issues of K-Electric.

The matter was discussed at the Cabinet Committee on Privatization on August 21, 2020, where senior finance ministry officials briefly discussed debts owed to K-Electric. However, they did not comply with the principle of compensation as agreed at the meetings held on the arbitration agreement.

“K-Electric is committed to quickly resolving long-standing debt and receivables issues of various federal and provincial government entities,” K-Electric said in response to a request for comment.

To date, according to the power company, its net claims, on a principal basis, have climbed to more than Rs 80 billion due to delinquencies from various public sector entities. He stressed that financial settlements between K-Electric and public sector entities should be treated in a fair and consistent manner and that the test applied to K-Electric’s debts should also be applied to its receivables.

Posted in The Express Tribune on September 15, 2020.

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