The Pakistan government has enlisted the army to root out corruption within the Water and Power Development Authority (WAPDA). The utility is to be broken down into 12 companies in March and the army will be given between 12 and 18 months to clean up the organization.

WAPDA made a profit of $370 million in 1996 but suffered losses of $1 billion in 1998. According to the government, WAPDA suffers from massive corruption. However it blames its parlous financial state on power-purchase-agreements (PPAs) signed with independent power producers (IPPs). When all the IPPs are operating the company will have an annual bill of $1.4 billion.

The government is locked in a battle with the IPPs to try and force them to reduce the tariffs agreed in their PPAs with WAPDA. However IPPs have argued that it is not them who have made WAPDA bankrupt but the internal corruption, theft and the utility’s inability to collect tariffs.

As part of the negotiations with the IPPs, the government is considering a proposal to allow the companies to import their own furnace oil if they will agree to a concomitant reduction in tariffs. The government’s stand against the IPPs, together with the US sanctions resulting from Pakistan’s nuclear weapons testing have resulted in losses on the Karachi stock exchange of around $4.3 billion.