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Energy mix swallows Rs130 bn of KP net hydel profit annually

By Riaz Khan Daudzai
March 22, 2019

PESHAWAR: The energy mix continues to swallow about Rs130 billion of the Net Hydel Profit (NHP) of the Khyber Pakhtunkhwa every year and the province is forced to buy back the power for Rs12 per unit, which it produces for Rs4 per unit only.

The province’s share of Rs130 billion continues to be distributed in violation of the Kazi Committee Methodology (KCM) under the “energy mix” arrangement” among the consumers of around 150 power stations and companies producing costly power from different energy resources, which is commonly known as energy mix. The energy mix is a group of different primary energy sources from which secondary energy for direct use - usually electricity - is produced.

Currently, Pakistan’s energy mix includes the consumption of Liquefied Natural Gas (LNG), Liquefied Petroleum Gas (LPG), furnace oil and coal for power generation.

Advisor to the chief minister on Power and Energy Himayatullah Khan told The News that Khyber Pakhtunkhwa, which is generating over 6000 megawatts (MW), is not only paying Rs12 per unit for the power it generates only for Rs4 per unit, but it is also deprived of its NHP of Rs130 billion every year as no formula has yet been worked out to facilitate payment of NHP as per the KCM.

He praised the authors of the Constitution who, he said, inserted a very expressive Article 161 (2) that says, “The net profits earned by the Federal Government, or any undertaking established or administered by the Federal Government from the bulk generation of power at a hydro-electric station shall be paid to the Province in which the hydro-electric station is situated.”

The advisor said that it’s the only clause of the Constitution that carries an explanation, saying, “Net profits shall 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 Interests (CCI), the operating expenses of the station, which shall include any sums payable as taxes, duties, interest or return on investment, and depreciation and element of obsolescence, and overheads, and provision for reserves.”

“Our demand is as simple as it is laid in these provisions of the Constitution,” Himayatullah Khan added.

The chief minister advisor said the payment for the power being generated in the province through hydropower units has a historical perspective and there was marked progress on the matter of payment of profit to the province from 1973 to 1984.

He elaborated that it was late Gen Ziaul Haq, who at the request of then-governor Gen (Retd) Fazle Haq, had formed a committee to resolve the issue once and for all.

The committee was headed by then-governor State Bank of Pakistan (SBP) Aftab Ghulam Nabi Kazi, who had also served as chairman of Water and Power Development Authority (Wapda) besides other bureaucratic positions.

The committee was mandated to determine the mode and ratio of profit as per the provisions of the Constitution of the country to the province for the power being generated by its hydropower projects.

The AGN Kazi Committee worked out the methodology for the payment of NHP which was subsequently approved by National Finance Commission (NPC) and the CCI also approved it in 1991, 1993 and then in 1997 making it the permanent mode of payment of the NHP to the province.

However, the methodology could never be implemented, he added and today 150 power generation units are producing costly electricity from a mix of resources or fuel ranging from Rs25 to Rs53 in the country.

For instance, the Kotri power unit is generating a unit for Rs53 and the government is selling it to the consumers for Rs12. The deficit is met with the cheap hydel power being produced in Khyber Pakhtunkhwa that costs the province about Rs130 million annually.

This is a massive loss and Chief Minister Mahmood Khan has very rigorously pursued the matter with the federal government authorities.

Prime Minister Imran Khan has also formed a committee to determine the NHP amount to the province and the matter is now at the brink of a solution. However, pragmatic steps are still awaited in this regard, he said.