Pakistan Decides to Challenge the Decision on Reko Diq Case

The Federal Government has announced that Pakistan is going to challenge the verdicts of International Centre for Settlement of Investment Disputes (ICSID) on the Reko Diq and Karkey cases.

Addressing a press conference in Islamabad, the minister said that the said fine was imposed on Pakistan because of faulty policies of the previous governments therefore Pakistan has to pay $6.2 billion for the Reko Diq case and $1.2 billion for Karkey.

Pakistan has to pay a huge amount in damages and in case of non-payment, the country’s foreign assets could be auctioned.

The ICSID, in July 2019, levied $5.976 billion fine against Pakistan in the Reko Diq case, while in 2017 the ICSID Tribunal ruled in favor of Karkey Karadeniz Elektrik Uretim, Turkish power company, and ordered Pakistan to pay approximately $780 million, with a monthly interest of $5.5 million.

Gas Infrastructure Development Cess

The federal government had waived off Rs. 208 billion for fertilizer and other sectors on account of GIDC through an Ordinance, but on September 5 it decided to withdraw the Gas Infrastructure Development Cess (Amendment) Ordinance 2019, which was promulgated by President Arif Alvi.

Minister for Power Omar Ayub Khan said that the decision on Gas Infrastructure Development Cess (GIDC) waiver was the right call and there was no confusion over it. But as objections were raised over the decision,  the government had to withdraw it later on.

The sole reason for introducing the GIDC (gas infrastructure development cess) ordinance was to reduce fertilizer prices after conducting a forensic audit of five fertilizer companies, he added.

The minister said it was the cabinet’s decision to clear the issue after the forensic audit of these fertilizer companies and reach a settlement with them.

There was no other reason for the GIDC ordinance and as soon as finger-pointing started at us we decided that the matter be settled in the Supreme Court because we are clean and have nothing to hide’.

Circular Debt

Regarding circular debt, he said that 88 percent of payments have been made to power producers adding that the circular debt will be fully paid off by 2020.

Omar said that the previous government did not pay the independent power producers (IPPs) therefore they approached international arbitrators to secure their overdue unpaid bills. He said that capacity charges will be reduced, the circular debt has been reduced from Rs. 29 billion per month to Rs. 10 billion and by December 2020 it would be zero.

  • The original claim for Reko Diq was estimated to be around USD 11 billion. The existing amount represents a negotiated settlement. There is not much meat in getting the amount waived or reduced through litigation, as that would require Pak Govt to prove that there was an incidence of corruption or illegal gratification involved in the deal on the part of the Claimant. That option was exercised earlier, albeit half-heartedly, and the Govt was unable to substantiate it with evidence. Let’s see what happens now.

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