KPK seeks additional Rs213bn in NFC award after FATA merger

ISLAMABAD: The Khyber Pakhtunkhwa (KPK) government plans to seek an additional Rs213 billion in the National Finance Commission (NFC) Award after the Federally Administered Tribal Areas (FATA) merger with the province, a senior official of the planning commission told The News.The KPK interim chief minister and his team would plead the case for the rights of the province and the merged FATA people in the NFC Award at the National Economic Council (NEC) meeting on Tuesday with Prime Minister Shehbaz Sharif.

According to the position paper which would be pitched by the government, the charter of 11 demands includes seeking a higher share in NFC award because of the FATA merger, net hydel profit payments on a regular basis, cheap electricity and gas because of maximum hydrogenation, and gas production in the province, windfall levy on crude oil, allocation of 20 percent of LPG to KP OGDCL from federal government share, compensation of un-utilised water share, increase in water use charges, and funds for Chashma Right Bank Lift Canal.

It pointed out that before the merger with FATA, Khyber Pakhtunkhwa’s share was 14.63 percent as per the current 7th NFC formula, whereas updated calculations following the merger increase this share to 19.64 percent with a total financial impact of Rs213 billion. If FATA indicators of poverty and backwardness are kept in view, the financial impact can increase from Rs213 billion to Rs220 billion. These calculations are based on the Population Census 2017 and Federal Board of Revenue (FBR) revenue collection targets for FY 2022-23. The NEC meeting would also be asked to ensure regular NHP payments and to implement the findings of the out-of-box committee, which asked for the transfer of hydropower stations to the provinces and announcement of a “2nd interim arrangement” with an enhanced rate of NHP.

The committee also mentions that currently the water storage component of WAPDA projects was financed out of the Public Sector Development Programme (PSDP), whereas the powerhouse component was financed out of WAPDA revenues, leaving no surplus cash for payment as NHP to the provinces.

This mechanism needs to be reviewed so the powerhouse component is also financed from the PSDP funds thereby leaving surplus cash for payment of NHP to the provinces. The province would also seek a 2nd interim arrangement with an enhanced NHP at the rate of Rs5/kWh with 10 percent indexation in WAPDA generation tariff with an effect of Rs1/kWh on consumer end tariff and immediate payment of outstanding NHP payment of Rs62 billion for 2022-23.

The KP government would also stress for the wheeling of cheap electricity by asking that DISCOs to withdraw their NEPRA petitions, which would enable the province to provide PEDO-generated electricity to industries in accordance with the law. The 18MW Pehur Hydro Power Station was established by Pakhtunkhwa Energy Development Organization (PEDO) and successfully operating since June 2020.

The government would also seek allocation of 100mmcfd gas for setting up thermal power plants in the province as the Economic Coordination Committee (ECC) of Cabinet in a meeting held on November 20, 2014 decided to allocate 100mmfc gas for setting up thermal power projects in Khyber Pakhtunkhwa. Accordingly, an MOU was signed on February 25, 2016 between the federal government and the government of Khyber Pakhtunkhwa. This, as per the working paper, would resolve the concerns of investors.

The province is unable to utilise approximately 3 MAF (million acres feet) of its share of water against its allocated share of 8.78 MAF determined by the Apportionment of the Waters of the Indus River System (1991), which makes up 34 percent of Khyber Pakhtunkhwa’s share and is presently being utilised by lower riparians (Punjab and Sindh).The government would also ask for compensation for this untilised share, which was to the tune of Rs112 billion since 1992. “A scheme needs to be put in place whereby Khyber Pakhtunkhwa is compensated for its non-utilised share of water by provinces which use the same,” the position paper says.

It would also ask for an increase in water use charges. As per the Power Generation Policy 2015 approved by the CCI, the Water User Charge (WUC) is to be paid at the rate of Rs0.425/KWh by the private sector hydropower projects to the province where the project is located.

The WUC rate should be reviewed every 5 years by the federal government to determine if an increase in is necessary. This review was due in 2020. About the Chashma Right Bank Lift Canal, KP will argue that it needs to be taken to its logical conclusion and funds need to be provided by the federal government from the PSDP to complete the project.