CCI meeting on Aug 6: KP to once again seek NHP under KCM mode

ISLAMABAD: The KP government will once again seek payment of Net Hydel Profit (NHP) under Kazi Committee Methodology (KCM) as per the AGN Kazi formula in the August 6 meeting of Common Council of Interests.

In case of approval by the CCI, Wapda, which is one of the most affected victims of circular debt, will have to pay Rs180 bn per year to the KP government, which is currently getting Rs20 billion as NHP. Punjab that is getting Rs15 billion per annum as NHP will get Rs79 billion under KCM mode and this is how the tariff of 33 billion units per annum procured through hydro generation per annum will hike to close to Rs13 per unit from existing tariff of Rs5.32 per unit.

This is how the myth that hyderogeneration is the cheapest one will stand nowhere rather it will also cause massive spike in basket price of power tariff. According to well-placed sources in the Water Resources Ministry, If the KP government is paid annually Rs180 billion, then the cost of 33 billion units procured through hydro generation will increase from Rs5.30 per unit to close to Rs10 per unit.

If the Punjab government is also paid Rs79 billion under KCM mode, then hydro generation tariff will further increase by Rs2.50 per unit to close to Rs13pr unit which will be more than that of many thermal power houses.

As per data available with The News, Wapda’s receivables have increased to Rs211 billion which are not being paid by CPPA (Central Power Purchase Agency) because of the circular debt that stands at Rs2.219 trillion.

Owing to this very fact, Wapda has no fiscal space enough required to usher in the big projects on its own which is why it is bound to generate liquidity through commercial loans. And to this effect, the KP government in the 42 meeting of CCI scheduled on August 6 will plead its case seeking implementation of Kazi Committee Methodolgy (KCM) for calculations of Net Hydel Profit.

KP wants to get legal cover of KCM mode and wants Wapda to provide commitment for payment of NHP under KCM mode. Sources at the Water Resources Ministry told The News that Punjab is also carefully looking at the move of KP and will follow suit if CCI approves the Kazi Committee Methodology mode to calculate Net Hydel Profit.

If Punjab is also paid under KCM mode too, then it will get Rs79 billion annually against Rs15 billion per annum in the head of NHP. The NHP is payable to the provinces as per Article 161-2 of the Constitution of Pakistan, which states that the net profit 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 station is situated.

And to develop a method for the calculation of the NHP, a committee was constituted on November 24, 1986 under the chairmanship of A.G.N Kazi, then the deputy chairman of the Planning Commission.

Federal finance secretary, additional secretary for water and power and KP finance secretary were members of the committee. It submitted its report to the government and it was approved by the CCI in a meeting held on January 12, 1991, for the past and future calculations of the NHP.

Then, the president issued a presidential order in support of the CCI decision, directing the federal government to guarantee payment of the NHP to the provinces. Based on the AGN Kazi committee formula, the NHP of KP for the year 1991-92 was calculated at Rs 0.21 per kilowatt-hour and the total amount became Rs6 billion for that year.

As per the formula, the NHP rates are to be increased according to the increase in the tariff of electricity. However, that Rs6 billion was capped and paid to KP annually till March 2016. After the PTI government took charge in the centre, the KP government raised the issue in the CCI. According to official documents, the technical committee established by the CCI held its first and last meeting on October 26, 2018 in the planning division and constituted a sub-committee under the chairmanship of the federal secretary of power to assist the main committee.

This sub-committee held its first meeting on November 28, 2018 in which the KP government submitted its claim of Rs128 billion, based on the calculations as per the AGN Kazi formula.

In the second meeting of the sub-committee held on December 13, 2018, the Punjab government and WAPDA submitted their stances. The Punjab government submitted its claim of Rs52 billion. The sub-committee held its third meeting on February 1, 2019 to finalize the issue and submitted its report to the main committee.

“The prime minister has also directed the technical committee on January 25, 2019 to submit its report in a month on the AGN Kazi formula but no action was taken at the federal level,” the KP official claimed.

As per the documents, the present NHP amount is calculated at the rate of Rs1.10 per kilowatt-hour, an interim rate which the federal government had notified on March 7, 2016 after inking a Memorandum of Understanding (MOU) with the KP government on February 25, 2016.

Before March 2016, the KP’s share of NHP was capped at Rs6 billion per annum since the fiscal year 1991-1992. Successive governments in the province had been struggling to move forward and start calculations as per the AGN Kazi formula. In PTI’s previous term in KP, the National Electric Power Regulatory Authority (NEPRA) while deciding a tariff petition in November 2015 filed by WAPDA, decided to uncap the NHP for KP from Rs6 billion per annum to Rs1.10 per kilowatt-hour for total generation in the province.

That decision by NEPRA was implemented by the federal government after it inked the MoU with the KP government and the KP’s share of NHP tripled – Rs6 billion to more than Rs18 billion per annum for the total number of units generated in the province.

The federal government also agreed to pay Rs70 billion as the arrears of the uncapped NHP in four installments, including Rs25 billion in fiscal year 2015-16 and the Rs15 billion for the next three years.

Now the alarming situation is in sight if the KP government move succeeds to get nod from the CCI for calculation of NHP unde KCM mode. However, sources say the Planning Commission, Water Resources Ministry and Wapda will oppose the move with their arguments.