Speakers Urge Centre to Uphold Constitutional Obligations on Net Hydel Profit

News Desk 

Peshawar: Speakers at the seminar held on Friday emphasized the constitutional obligations related to Net Hydel Profit (NHP) and the urgent need for fair resource distribution among provinces, particularly focusing on Khyber-Pakhtunkhwa (KP).

The seminar, organized by the National Think Tank – Good Governance Forum in collaboration with the Institute of Management Sciences in Peshawar, highlighted recent developments in the energy sector.

Key points discussed included:

The Peshawar Electric Power Company (PEDO) has begun the wheeling process to provide affordable electricity to the industrial sector. In the first phase, 18 MW of electricity was successfully wheeled from Pehur, with 148 MW scheduled for the second phase.

A stay order issued by DISCOs was initially issued by the Islamabad High Court in 2021. This order was later vacated and sent back to NEPRA for further review. NEPRA conducted a public hearing on November 28, 2023, and a final decision is still pending.

The speakers stressed the need to find an equitable balance to promote electricity wheeling in KP to foster industrialization and sustainable economic development in the province.

To resolve the long-standing dispute over Net Hydel Profits (NHP), the following options were proposed: 

• Cash payment of the outstanding NHP balance amounting to Rs. 1,510 billion, as per the AGN Kazi methodology.
• Transfer of WAPDA power houses to the provinces.
• Until the above options are finalized, the federal government should announce a second interim arrangement: payment of NHP should be made directly from CPPA-G through an ESCROW account.

Dr. Syed Akhtar Ali Shah, Chairman of the National Think Tank and former Home Secretary & Inspector General of Police, stated that Article 157 of the Constitution grants the federal government the authority to construct hydroelectric power installations, but requires prior consultation with provincial governments.

He further explained that Article 161(2) mandates that the net profits from hydroelectric power generation must be allocated to the province where the power station is located.

Payment Delays Persist

In 1991, the Council of Common Interests (CCI) endorsed the Kazi Committee Methodology (KCM) for calculating Net Hydel Profit (NHP). In 2005, an arbitration tribunal awarded Khyber Pakhtunkhwa (KP) Rs. 110 billion on October 9, 2006.

 However, the Water and Power Development Authority (WAPDA) challenged this decision in civil court later that year. The amount was eventually disbursed in 2009 following negotiations with the Chief Minister of KP and the Prime Minister.

Despite these provisions, implementing NHP has faced significant challenges, leading to a sense of deprivation among provinces. For instance, in 1992, KP received a payment of Rs. 6 billion while its budget for that year was Rs. 14 billion, and its Annual Development Program was Rs. 4.8 billion.

KP has not received any NHP payments for the last five months, despite estimating a need of Rs. 31.5 billion for the fiscal year 2022-23. In 2016, a Memorandum of Understanding (MOU) was signed to increase the annual NHP from Rs. 6 billion to Rs. 18 billion. 

However, recent payments have been irregular, severely impacting KP’s financial health and development efforts. The interim arrangement established in 2016 set the NHP at Rs. 1.10 per unit with a 5% annual indexation, raising the annual NHP to Rs. 18.7 billion.

The provincial government of KP asserts that the transfer of NHP is a constitutional obligation of the federal government and WAPDA. Erratic payments have hindered KP’s ability to meet its budgetary needs, prompting the provincial government to seek resolution from the Prime Minister. 

In 2021, the CCI formed a committee of technical and financial experts to propose solutions for NHP payments. The committee suggested that the provincial governments of Punjab and KP examine the possibility of transferring WAPDA’s hydro power stations to the provinces as compensation for NHP arrears. 

KP was also advised to prepare a proposal for a second interim arrangement for NHP payments.

To clear the arrears, the federal government might consider transferring ownership of all power stations to KP in exchange for settling the Net Hydel Profit arrears. It has been calculated that before the 2015/2016 fiscal year, WAPDA owed KP Rs. 37 billion.

Following the 2016 MOU, which increased the NHP from Rs. 6 billion to Rs. 18 billion per annum and included a 5% indexation, the additional amount owed to KP from 2015/2016 to 2023/2024 totals Rs. 41 billion.

In summary, WAPDA currently owes KP a total of Rs. 78 billion, comprising Rs. 37 billion from before 2015/2016 and Rs. 41 billion from the period of 2015/2016 to 2023/2024.

Dr Shah also provided insights into the legal aspects of Net Hydel Profit, emphasizing its significance for the region’s economic landscape.

Hydel Power Insights

Keynote speaker Fuad Ishaq, President of the Chamber of Commerce and Industries, Khyber Pakhtunkhwa, provided an industry perspective on the prospects of hydel power. He highlighted the potential benefits for local businesses and the overall economy.

Himayatullah Khan, a Technical Expert on Net Hydel Profit and former Adviser on Energy and Power, delivered an in-depth presentation that analyzed the AGN Kazi formula. He discussed the impact of hydel power generation on the country and the advantages of wheeling, emphasizing the need to optimize hydel resources for sustainable energy production.

Engr Iqbal Zafar Jhagra, former KP governor, spoke about the significance of Net Hydel Profit and its implications for the province’s development. His address underscored the necessity of strategic planning to effectively harness hydel resources.

Dr Usman Ghani, Director of the Institute of Management Sciences, concluded the seminar by reaffirming the institute’s commitment to facilitating discussions on important topics that drive societal progress. He highlighted how IMSciences distinguishes itself from other universities in KP by fostering a conducive environment for such critical dialogues.

The seminar concluded with a compelling call for the federal government to uphold its constitutional duties and ensure that KP receives its rightful share of hydel profits. 

Adhering to these constitutional obligations is crucial not only for the province’s economic stability but also for promoting cooperation and fairness among Pakistan’s federating units.