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August 21, 2018

PTI govt will facilitate net hydel profit payment


August 21, 2018

PESHAWAR: The coming into power of the Pakistan Tehrik-e-Insaf (PTI)-led governments both in the Centre and Khyber Pakhtunkhwa (KP) has offered an opportunity for implementation of the Kazi Committee Methodology (KCM) that may increase the payment of Net Hydel Profit (NHP) to KP from the current Rs28 billion to around Rs100 billion per annum.

The KCM says that the NHP must be computed by deducting from the revenues accruing from the bulk supply of power from the bus-bars of a hydro-electric station at a rate to be determined by the Council of Common Interest (CCI), the operating expenses of the station, which will include any sums payable as taxes, duties, interest or return on investment, and depreciations and element of obsolescence, and overheads, and provision for reserves.

The committee was constituted on July 25, 1985 and was headed by the Planning Commission deputy chairman Aftab Ghulam Nabi (AGN) Kazi. It was mandated to devise a formula for determining the NHP for the provinces.

Its report was finalised on July 28, 1987 and was approved by the CCI on January 12, 1991 when the same political party (PML-N) was in power both in Centre and the province. By that time, power generation was the exclusive domain of Wapda and tariff was determined by the Finance Division before the creation of National Electric Power Regulatory Authority (NEPRA).

For the first time the NHP amounting to Rs6 billion was paid to KP during 1991-92. The amount had been capped since then despite the fact that power tariff has been increased manifold. The Rs6 billion NHP was based on the provisional profits of Wapda calculated for 1990-91. The National Finance Commission (NFC) had recommended increase at the rate of 10 percent on Rs6 billion for future years, but Wapda did not comply.

The position of KP on KCM implementation was neither considered by Wapda nor honoured by federal government. Owing to the difference of opinion about the computation of NHP between KP and Wapda, an arbitration tribunal was constituted in 2005 to resolve the dispute.

The arbitration tribunal announced its award on October 9, 2006. It gave an award of Rs110.101 billion as NHP arrears to Khyber Pakhtunkhwa. During the proceedings of the 7th NFC Award, the federal government agreed to honour the judgment of the arbitration tribunal on the long-drawn issue of payment of Rs110 billion on account of NHP to KP.

However, it did not apply KCM on the payment of NHP.

The provincial government approached the CCI which, according to the provincial Finance Department, has agreed to implement KCM.

The NHP has been uncapped which is now payable to the provincial government at the revised rates of Rs1.10 per KWH (of the electricity production in Khyber Pakhtunkhwa). The province is now entitled to receive about Rs18.7 billion per annum.

Secretary Finance Department, Khyber Pakhtunkhwa, Shakeel Qadir Khan told The News that the provincial government has been actively engaged in resolving the issue of NHP.

He said that under the KCM the province was to be paid the price for an electricity unit as computed on the bus-bar after the deduction of other charges such as taxes, transmission, maintenance, human resource and other expenses.

He said by the current arrangements the province was receiving the NHP at the rate of Re1.15 as per unit while by the KCM its rate would be about Rs5.90 per unit. It is more than fourfold increase.

He said as the electricity generation was a mix of thermal, coal and hydel resources and the government has to subsidise with the low cost of the hydropower generation the electricity produced from other sources.

He added they had attained fresh endorsement from the CCI on the implementation of the KCM at its last meeting and Punjab has also lately joined them in their demand for the KCM implementation because they are also producing electricity from the Ghazi Barotha project and they would also want the NHP payment by the same methodology.

Shakeel Qadir pointed out that more importantly KP’s hydropower generation is likely to increase as Dassu, Diamer-Bhasha and Mohmand dams would also be built in the next seven to 10 years and payment of NHP on KCM would change the financial landscape of the province.

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