Newsletter March 2014

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F-8/4, Islamabad, Pakistan

(92-51) 8438140-2

(92-51) 8316140


The Case for Private Transmission Networks

ElectricityDespite the law permitting, as far back as 1997, private electricity transmission networks in the country, NEPRA’s failure in instituting a regime for private transmission networks is deplorable and risks backsliding on aggressive generation capacity enhancement plans of the Government.

The power transmission and distribution network in Pakistan is aging fast.  By some estimates, its capacity to transport power is limited to 20,000 MW.  With projected power demand over the next few years approaching this number, substantial investment is required in this area.  Construction of high voltage transmission networks has a leadtime of several years.  Funding by the public sector under PSDP is constrained.  The National Transmission & Despatch Company (NTDC) responsible for constructing and operating high voltage transmission networks looks to public sources of funding for significant network augmentations.

The funding and construction leadtime delays can block timely construction and operation of new power plants.  By way of a recent example, approximately 500 MW of wind power was delayed by about 12-18 months due to non-availability of 220kV circuit in the wind corridor in Southern Sind. The estimated cost of the sub-station and circuit was about 100 m US$.  NTDC has received the go ahead from the Government to construct this circuit, but the processing and planning has taken over a year delaying the timely construction of the wind power projects.  About 20% of the 100m US$ will be funded by NTDC through its own resources, with the balance coming from the Government.  Clearly, the public funds will be stretched over the years to construct more transmission lines for evacuation of power from remote sites.  The project for construction of transmission line for evacuation of power from Neelum-Jhelum hydro project has been delayed by several years and is now already a subject of scrutiny for failure in timely planning and construction.  Another instance where exclusive reliance on NTDC to construct high voltage transmission lines could be problemtic is the Quaid-e-Azam solar power project in Cholistan.  Several remote hydro sites which can generate power at affordable tariffs will require parallel investment in transmission facilities.

Section 19 of the NEPRA Act 1997 envisages “Special Transmission Licensees” constructing, owning and operating private transmission networks.  Despite interest in the private sector to undertake such projects, no meaningful progress has been witnessed because of absence of a regulatory framework addressing the details of Special Transmission Licenses.  Even a template of such a license has not been developed by NEPRA.

Private transmission network is an established line of business worldwide.  Pooled investment vehicles for transmission networks by generators or stand-alone private transmission companies can remove one significant bottleneck in meeting the power deficit in the country.  It is high time that the regulator should develop a robust framework for Special Purpose Transmission Licenses.

Ejaz Ishaq Khan, (Partner), is well renowned for his expertise in the Power Sector and is currently also engaged in provision of legal services to the Alternative Energy Development Board (AEDB).


Powers of PTA: Confined or Illimitable?

PTAIn a most recent decision authored by Justice Jawwad S. Khawaja, the Supreme Court has held that the demand of Rs.700 million made by Pakistan Telecommunication Authority (PTA) from Ufone as Annual Spectrum Administrative Fee (ASAF) was illegal.

PTA had issued a Show Cause Notice to Ufone in October 2008 under section 23 of the Telecom Act, 1996 wherein it contended that it was obligatory on Ufone as a licencee to pay charges for the use of frequency spectrum. PTA was of the view that ASAF could be imposed by virtue of conditions in Ufone’s licence (which required it to pay charges for use of frequency spectrum), read with terms of the Mobile Cellular Policy issued by the Federal Government in 2004. The Supreme Court however held that the charges envisaged by terms of the 2004 Policy was a new charge and in addition to the charges payable under the original licenses issued to Ufone, Paktel (now Zong), Instaphone and Mobilink. It further held that the charge envisioned in 2004 Policy was the reasonable operational cost for “managing, licencing and policing” frequency spectrum by the regulators and not “use” of frequency spectrum by the licencees.

The Court held that since Ufone had decided not to obtain a new cellular licence under the 2004 Policy unlike other cellular mobile companies, ASAF was outside the scope of its licence. The Court held that as per the terms of the licences and the Telecom Act 1996, “Licensees entering the cellular market on commercial considerations are entitled to the certainty that financial assumptions on the basis of which they got their license remain unaltered during the currency of their licenses”.

The Court rejected the argument forwarded by PTA that not demanding ASAF from Ufone, when other cellular mobile companies continued to pay it, would be a contravention of Article 25 of the Constitution which requires equality before law and non-discrimination among citizens. In this regard, the Court reiterated the legal position that discrimination could not be made between similarly placed persons and since the terms of licence of the cellular mobile companies were not similar, there was no violation of Article 25.

The Supreme Court further held that although the Federal Government could give Policy directives, however under section 8 of the Telecom Act 1996, such directives could not be inconsistent with the Act itself. Since pursuant to section 22 of the Telecom Act, PTA cannot amend the conditions of the licence without the consent of the licencee, PTA fell in error in thinking that the 2004 Policy directive required it to demand ASAF from Ufone which was beyond the conditions of its licence. In this regard, the Court castigated PTA’s actions taken in the belief that it was a subordinate department of the Federal Government and not an independent regulator envisioned by law.

 Muhammad Ashraf Tiwana, (Partner) is one of the founding members of AQAAL Advocates and his expertise include laws relating to banking, financial, project finance, mergers and acquisitions, competition, corporate and commercial work areas.

Policy on Contributions by Foreign Organizations

profitNot for profit organizations operating in Pakistan have, over the course of the last few years, increased significantly, both in number and scope of work. These organizations are governed by various Acts/Ordinances such as The Societies Registration Act 1860, The Trusts Act (II of 1882), The Charitable Endowments Act (VI of 1890), The Voluntary Social Welfare Agencies (Registration and Control) Ordinance 1961, Section 42 of The Companies Ordinance 1984 and several others.

While these instruments cover areas such as registration, internal governance, accountability, finance, and management of the organization, the receipt of funds by nonprofit organizations has remained hitherto unaddressed.

Recently however, the Ministry of Finance, Revenue, Economic Affairs, Statistics & Privatization (Economic Division) of Pakistan has issued the ‘Policy for Regulation of Organizations Receiving Foreign Contributions’.

The policy enforces significant restrictions on domestic and foreign NGOs seeking foreign contributions. Any organization now intending to receive foreign economic assistance shall register with the Government of Pakistan. Economic assistance under the Policy includes money, goods and services. The application for registration shall be vetted by the Ministry of Interior, the Provincial Governments and/or local governments.

Upon approval of application for registration, the organization shall sign a Memorandum of Understanding (MoU) with the GoP.  A template of the MoU has been made available publicly. The duration of MoU is to be five years however, organizations may apply for renewal of registration.

Following the MoU, any funds received by the organization shall be reported to the Government. Reporting requirements shall include terms and conditions of receiving these funds and bank accounts which receive these funds. Accounts receiving foreign funds shall be audited on an annual basis and a copy of these audited accounts shall be presented to the Government annually.

Furthermore, an organization is expected to provide annual reports to the Government/local government concerning its activities in accordance with the MoU. Most importantly, the organization is obliged to provide information relating to its funds and activities whenever required by the Government.

The Policy appears to be one of the first steps attempting to regulate foreign contributions in Pakistan. The Economic Coordination Committee (ECC) is currently in the process of finalizing its recommendations on the formation and enactment of Regulation of Foreign Contributions Act 2013, which is expected to be presented to National Assembly for approval in 2014.

Roheen Ahmed, (Associate), had recently been involved in a research assignment relating to not for profit organization registrations in Pakistan and regulation of funding received by them.

The Blind lawyer and SECP E-Services Accessibility

disabilityApproximately two million blind people live in Pakistan. While the opportunities available to them remain limited in every avenue, an aspect that is perhaps readily remediable is that of accessibility to online information.

With all major regulators having active websites, the first step towards greater convenience has already been taken. To make these websites available to the blind, the only further step required is that of including a screen reading option. This would allow professionals who are visually impaired easier and greater accessibility, leading to their improved performance.

Saqib Javed (Associate)

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