Organised corruption took place in power sector: Review committee

Power companies received payments from the government as rent for power plants under the guise of power purchase agreements, where corruption, rather than electricity supply, was the main objective, according to the government-formed review committee.

The committee observed that the agreements posed no risk to the businesses, as all risks were borne by the government. It also stated that this was not a case of mere administrative failure arising from incompetence, but rather, corruption was directly involved. Therefore, the contracts could be terminated.

Information obtained from conversations with three members of the power sector contract review committee revealed these insights.

They stated that during the previous government’s over 15-year tenure, power generation had increased fourfold, while costs had risen 11 fold.

According to the review committee members, the “Speedy Supply of Power and Energy (Special Provision) Act” was enacted primarily to facilitate corruption. The sector had witnessed organised corruption. The power purchase agreements served as secure investments for rent extraction. The power plants themselves imported fuel, a process that was also rife with corruption.

However, the committee members noted that if the government now wants to cancel those contracts, it would first need to conduct an investigation to uncover concrete evidence of corruption.

Speaking to Prothom Alo, they said that their report could provide grounds for the Anti-Corruption Commission (ACC) to conduct an inquiry. During the tenure of the previous government, one after another unilateral agreements had been signed under the special provision act. These contracts granted every advantage to business groups without regard for the state’s interests. One contract appeared to be a replica of another. From the former Prime Minister’s Office to the power agencies, all were involved. Ministry recommendations even contained suggestions such as “there may be no gas, but the agreement should proceed.”

Prothom Alo spoke with three members of the review committee. On condition of anonymity, they said that not only the contracts themselves, but the entire pre-contract process had been scrutinised. Evidence emerged of the direct intervention of the former prime minister. The Ministry of Power, Energy and Mineral Resources was under her charge. Two former power secretaries, who later served as principal secretaries to the Prime Minister’s Office, were found to be involved in the organised corruption. These two are Abul Kalam Azad and Ahmad Kaikaus.

The “Speedy Supply of Power and Energy (Special Provision) Act”, commonly known as the indemnity law, was repealed in November last year. Prior to that, on 5 September last year, the Ministry of Power, Energy and Mineral Resources formed a five-member committee to review the contracts signed under this Act during the tenure of the previous government.

The committee is chaired by retired High Court Division justice Moinul Islam Chowdhury. The other members are BUET professor of the Department of Electrical and Electronic Engineering and pro-vice-chancellor, Abdul Hasib Chowdhury; former chief operating officer (COO) of KPMG Bangladesh, Ali Ashfaq; former lead economist of the World Bank’s Bangladesh office, Zahid Hussain; professor of economics at the Faculty of Law and Social Science, University of London, Mustaq Hossain Khan; and senior Supreme Court lawyer Shahdeen Malik.

The review committee today, Sunday, submitted an interim report to the Ministry of Power, Energy and Mineral Resources. It will submit its final report in mid-January.

In addition, the committee has submitted a separate report on irregularities in the contract signed with India’s Adani Group for a power plant.

Following the submission, members of the committee addressed questions from journalists during a press briefing at the Ministry’s conference room.

In response to a question at the press conference, the ministry’s adviser, Muhammad Fouzul Kabir Khan, said that if contracts are cancelled without valid cause, compensation issues are addressed within the terms of the contracts themselves. However, each agreement contains a declaration affirming that no corruption was involved in its execution. If that clause is violated, the contract can be cancelled.

“But the court will not accept mere verbal assertions,” he said, “specific evidence must be presented before the court. With the committee’s assistance, we are investigating the irregularities in the contracts. If evidence is found, there will be no hesitation in cancelling them.”

Committee chair justice Moinul Islam Chowdhury said that the extent to which the contracts can be cancelled will be determined in due course. The contracts in the power sector are highly technical, he noted, which is why the review process has taken time. “Widespread corruption has been detected. The final report will be submitted by mid-January,” he added.

In response to a journalist’s question, committee member Zahid Hussain said that all documents related to the contracts had been reviewed, and billing information obtained from the Power Development Board (PDB) had been analysed.

“We examined what types of irregularities occurred. There was excessive centralisation of power, the ministry was always under the prime minister’s control. The amount paid in bills compared to the electricity actually generated is so disproportionate that even Einstein could not reconcile the figures,” he remarked.

When asked about possible compensation if contracts are cancelled, committee member Shahdeen Malik said, “Those who claim compensation will have to present their calculations of loss. The committee cannot determine that matter.”

Speaking at the press briefing, committee member Mustaq Hossain Khan said, “Widespread corruption took place. Because of corruption, electricity prices have increased by 25 per cent. Without subsidies, prices would have risen by 40 per cent. At such prices, businesses cannot survive. This must be brought down. Those who have taken the money and left must be made to realise that they will not get away with it.”

He further said, “Rushing the process could lead to mistakes, which is why it has taken time. However, the contracts between the state and the companies are sovereign agreements — they cannot simply be annulled at will. Doing so could result in heavy penalties.”

Regarding the contract with Adani’s power plant, Mustaq Hossain said that irregularities and corruption surrounding Adani’s agreement have already been challenged in court through a writ petition. The court has sought a report.

“Within a month or so, strong evidence will come to light. These findings can be used to initiate legal proceedings both domestically and internationally,” he said.

The review committee’s main recommendations focus on future safeguards to prevent such contracts from being made again. It advised that before entering any contract, a thorough assessment should be conducted by an independent commission.

Based on the committee’s recommendation, the “Power Tariff Review Committee” was formed on 21 January to reassess the pricing of electricity. That committee’s work is ongoing.

According to the contracts, the Power Development Board (PDB) purchases electricity from each power plant. Each contract specifies a formula for determining the price per unit of electricity. Prices are fixed according to that formula. The rates differ from one power plant to another.

Allegations have been made that special privileges were granted to certain parties through mutual understanding. The previous Awami League government exploited the provisions of the special law to award contracts without tender.

The Special Provision Act was enacted in 2010 and its tenure was extended repeatedly. Under this Act, no decision taken could be challenged in court. For that reason, it became known as the indemnity law. One contract after another was signed under this Act without tenders during the previous government’s rule.