Alleged grafts at private power projects must be pursued: Legislators

The House of Representatives' Commission VIII demanded the Attorney General's Office to legally pursue massive graft allegations at private electricity projects, especially in the Paiton I project, contending that if they were not addressed legally, it could burden the government with Rp 170 trillion in new debt.

"The burden we have to bear from private electricity projects reach Rp 170 trillion. This is not a small number, this becomes the largest burden to our budget after interest rates payment for bank recapitalization bonds," the commission deputy chairman Arifin Panigoro said in a hearing with Attorney General Marzuki Darusman.

Arifin, who controls the Medco Group of oil and gas companies and an executive of the Indonesian Democratic Party of Struggle (PDIP), said that if the government could prove that those U.S. investors in independent power producers were involved in corruption, collusion and nepotism practices, or locally known as KKN, they were can be charged with anti-graft law in their country.

He suggested that the government follow the step of Pakistan that hired the best lawyers from Sutton & William and won the case against private power investors.

Leglislator Ramson S. of the PDIP faction called on the attorney general to legally pursue also other problems with private electricity producers, including Patuha and Dieng power projects owned by Cal Energy/Mid American Energy that had been canceled by the government.

Ramson noted that such legal actions were necessary to counter a decision from an international arbitration that punished Indonesia to pay US$290 million to Cal Energy/Mid American Energy. The claim has been taken over by Overseas Private Insurance Corp. (OPIC),

Attorney General Marzuki revealed that his office had found at least $20 million of the investment fund for Paiton I project was used for bribing Indonesian officials. In addition, there was also an unlawful inflation of capital cost by $150 million that has been burdened to the government.

Indications of KKN in Paiton I project involves officials in the government, especially those in the Ministry of Mines and Energy, state electricity company PT PLN, a consortium of local investors that cooperate with foreign investors.

"The potentials for KKN in Paiton I project was originated from the too optimistic prediction on the growth of electricity demands in the country, that eventually concluded that private electricity was needed," Marzuki said.

Meanwhile, there are many laws and regulations that were bypassed by the government at that time to allow private investors invest in the power sector.

Paiton I, Marzuki said, was against Law No. 1/1976 and Law No. 11/1970 that ban private investors enter electricity investment and ban the granting of tax breaks for more than three years.

And according to Law No. 15/1985 on foreign investment and Government Regulations No. 10/1989 and No. 36/1979, private electricity producers must sell their power directly to the people, but with the issuance of presidential decree No. 37/1992, private electricity producers can sell their power to PLN. (*)