Government washes hands off Casecnan

Nobody in government is accepting responsibility for the Casecnan project provision requiring government to reimburse the project proponent for its tax payments of $51.59 million, plus 48 percent interest a year to make it $878 million in 20 years.

At the resumption of the public hearing by the Senate Blue Ribbon Committee on the controversial Casecnan multipurpose project, the panel was stumped that no one among present and former government officials involved in the project would admit responsibility for the provision that would have allowed a $51.49-million tax payment by CE Casecnan Water and Energy to balloon to $878 million in 20 years.

Apolonio Bautista, former administrator of the National Irrigation Administration, said he was not aware of how that provision entered the contract.

Secretary Dante Canlas of the National Economic Development Authority, who was chairman of the Investment Coordinating Council (ICC) when the Casecnan project was signed in1995, said neither NEDA nor the ICC examined the details of the contract.

Former NEDA chief Cielito Habito said he could not remember the particular provision, although he admitted that the Casecnan project was the most deliberated project by the ICC.

Former Agriculture Secretary Roberto Sebastian said he was also not aware of the provision on taxes, although he questioned the computation of the interest rate at 48 percent.

Sen. Sergio Osmeña III said he knew Bautista had no financial sophistication so somebody should have assisted him in negotiating the Casecnan contract.

"We can’t afford to overpay. We have to make sure our finite resources are protected," Osmeña said.

Finance Undersecretary Noel Kintanar said that the Department of Finance found the $51.49 million tax payments as part of the CE Casecnan’s investment cost and therefore, subject to return on investment.

Kintanar, however, said they found the 48 percent to be too high, so they renegotiated with CE Casecnan, which was finalized last May.

"That was the time we in the Senate were making noises about the Casecnan project," interjected Sen. Joker Arroyo, chairman of the Blue Ribbon committee.

Kintanar said they were able to reduce the interest from 48 percent to only17.9 percent, with the government paying $131.9 million "up front."

He explained that payment of the taxes was compounded from 1995.

"And we were supposed to be grateful for that!" Arroyo snorted.

He said the net effect of the questioned provision is that the government will be paying the project proponent for all the taxes it has paid the government.

"You have to fully explain this to me because until now, I still could not understand this," Arroyo fumed.

Osmeña said that even if the contract says the farmers will pay for the taxes through increased water delivery fee, the government will actually end up paying the whole thing.

"We all know that farmers do not pay irrigation fees so this will be absorbed by the government through its debt servicing," Osmeña argued.

The investigation was an offshoot of the privilege speech of Sen. Rodolfo Biazon questioning the "onerous" contract entered into by the government for the Casecnan project.

At present, the government is paying $3.3 million a month for 228 gigawatthours of power although only 65 percent is being delivered, and about $3 million a month for 800 million cubic meters of water, although an average of only14.6 million cubic meters is being delivered the first six months of the year.

Under the contract, the government is obliged to pay the full amount, even if the project proponent could not deliver the contracted volume of water and power.– Efren Danao