Non-payment of NHP arrears to KP

Non-payment of KP’s hydro profit

Realising that Wapda was too weak financially and reluctant to provide the money, KP has focused on the federal government, being guarantor of the AT award. – File photo

An all-party conference held in Peshawar recently has urged the federal government to pay the net hydro-profit arrears owed by the Water and Power Development Authority to Khyber Pakhtunkhwa at the earliest.

Expressing concern over the capping of the profit at Rs6 billion, the conference backed the provincial government in its efforts to get the arrears.

Prime Minister Yousuf Raza Gilani had recently asked the federal finance secretary to sit with his KP counterpart to sort out the matter.

The Arbitration Tribunal (AT), headed by Justice Ajmal Mian, had decreed that the Wapda would pay Rs110 billion profit arrears in equal installments of Rs25 billion to KP in July each year. Last year, the federal government paid Rs25bn but it has released only Rs4.6bn so far this year. The delay in payment of arrears has exposed the province to financial strains.

The issue has been a major irritant since the 1973 constitution took effect. In September 2008, in a meeting with a KP jirga, Gilani had formed a committee of experts to present its report within two months on the issue of capped net hydro profit (NHP) amount. However, the committee is yet to give its decision.

While participating in the committee, KP has opposed the reopening of issues already decided/settled in the AT and NFC awards.

The KP chief minister has also opposed the adjustment of NHP against federal government loans as is being suggested by some quarters.

Senator Haji Muhammad Adeel, a former KP finance minister and NFC member, says Wapda owes us around Rs300bn now.

“Apart from Rs75bn NHP arrears, Wapda owes us over Rs55bn for 10 per cent interest on the outstanding amount and Rs203bn unpaid increased NHP amount post AT award and another Rs40 billion for this year’s NHP,” he says.

Adeel laments that Wapda has capped the annual NHP at Rs6bn, deviating from A.G.N Kazi formula, unanimously endorsed by the NFC in February 1988, approved by the Council of Common Interests in January 1991 and validated by the presidential NFC order No3 of 1991. The NFC had recommended increase of 10 per cent on Rs6 billion for future years.

“While Punjab is being paid Rs5bn for 100MW of electricity produced at the Ghazi Barotha power project, KP is given Rs6bn for 4,000MW produced by it, while power tariff has also been increased manifold since then,” he adds.

Wapda, however, proposed Rs72bn against Rs83bn already paid, thus claiming Rs10.9bn as overpayment to KP while maintaining that surcharges of Rs829bn and other revenues of Rs195bn could not be used for NHP determination. It also stubbornly rejected as unconstitutional the Kazi formula.

Realising that Wapda was too weak financially and reluctant to provide the money, KP has focused on the federal government, being guarantor of the AT award.

Based on the NFC award, the AT award was binding on all parties. But Wapda challenged it in a civil court. Feeling betrayed, KP also went to the Supreme Court against this move where the case is still pending.

Aftab Ahmad Khan Sherpao says: “Arbitration was unnecessary in the matter. The NHP was/is the constitutional right that was accepted by A.G. N. Kazi Commission established in 1987, also by the Council of Common Interest and guaranteed by the constitutional provisions; no federal government could deny net hydro profit to the province. The KP government must stick to the Kazi formula. But we would also like to know as to what has happened to the Hydro Development Fund and the money provided thus far,” he adds.

“”””””””””””””””””””””””””””””””””””””””””””””””””””””””””””””””””””””””””””””””””””””””””””””””””””””

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Original text of the article

The Net Hydel Profit dispute between KP and WAPDA/federal govt

By Tahir Ali

An all parties’ conference in Peshawar recently called upon the federal government to pay to Khyber Pakhtunkhwa its net hydel profit (NHP) arrears the Water and Power Development Authority (WAPDA) owes to it as soon as possible. The conference also expressed concern over capping of NHP at Rs6 billion and resolved to back the KP government in its endeavours to get NHP arrears.

Khyber Pakhtunkhwa intends to take up the issue forcefully in coming days. Prime Minister Gilani recently asked the federal finance secretary to sit with his KP counterpart to sort out the matter.

The Arbitration Tribunal (AT) headed by Justice Ajmal Mian had decreed that WAPDA would pay Rs110bn NHP arrears in equal instalments of Rs25 billion on July each year.  Last year, the federal government paid Rs25bn but it has released only Rs4.6bn till date and intends to release the amount in bits and pieces. KP abhors this scenario as it has projected the money in its revenue estimates and the denial or delaying of the amount could expose the province to financial problems.

The issue has been a major irritant since 1973 when the present constitution took effect. In September 2008, in a meeting with a KP jirga, Gilani had formed a committee of experts to present its report within two months on the issues of capped NHP amount, NHP up to 2004-05 and from 2005-06  onwards along with mark up but the committee is yet to give its decision.

KP finance ministry’s white paper says while participating in the committee, KP shall not accept reopening of issues already decided/settled, that any settlement must conform to the parameters of AT and NFC awards, and that calculation of NHP shall be in accordance with AGN Qazi formula (QF).

Khyber Pakhtunkhwa chief minister wants the NHP amount in cash and would not accept its adjustment against federal government loans as is being suggested by some quarters.

Senator Haji Muhammad Adeel, former KP finance minister and member of KP national finance commission (NFC) team says WAPDA owes us around Rs300bn now. “Apart from Rs75bn NHP arrears, as per QF and AT award, WAPDA owes us over Rs55bn for 10 per cent interest on the outstanding amount and Rs203bn for due but unpaid increased NHP amount post AT award and another Rs40 billion as this year’s NHP,” he says.

Adeel laments that WAPDA has capped the annual NHP at Rs6bn against the dictates of QF that had been unanimously endorsed by NFC meeting in February 1988, approved by Council of Common Interests in January 1991 and validated by presidential NFC order No3 of 1991. The NFC had recommended increase of 10 per cent on Rs6 billion for future years.

“While Punjab is being paid Rs5bn for around 100MW of electricity produced at Ghazi Barotha power project, KP is given Rs6bn despite the fact that it produces around 4000MW and power tariff  has been increased manifold since then,” he adds.

The AT had agreed with QF for calculating NHP for 1991-92 but did not apply the QF mechanism for the years onward and rather adhered to a mechanism of compound indexation of 10% per year in NHP using Rs6.9bn as benchmark which was calculated on the basis of QF by WAPDA for 1991- the year prior to restructuring and also when no surcharges and additional surcharges were levied.

In the AT, the then MMA government had claimed Rs595 billion from 1991-2005 but it had abandoned NHP demand from 1973 to 1991 as well as interest on the amount WAPDA owed to KP. It further demanded the revenues should include all the revenues paid by the consumers, including surcharge and additional surcharges.

WAPDA however proposed Rs72bn against Rs83bn already paid, thus claiming Rs10.9bn as overpayment to KP and said that surcharges of Rs829bn and other revenues of Rs195bn could not be used for NHP determination. It also stubbornly rejected as unconstitutional the QF.

KP, realising that WAPDA is too weak financially or reluctant to provide the money, has focussed on the federal government being guarantor of the AT award.

Based on the NFC award, AT award was binding on all parties. But WAPDA challenged the award in a civil court. Sensing betrayed, KP also went to the Supreme Court against this move where the case is still pending.

Aftab Ahmad Khan Sherpao, an opposition politician in the province, says the same coalition at the centre and province should have no problem in increasing annual NHP, giving the province its arrears along with mark up for the entire period. But in case they fail to do so, ANP should come out of the federal government.

“Arbitration was unnecessary in the matter. NHP was/is the constitutional right that was accepted by AG N Qazi commission, established in 1987 by CCI and guaranteed by constitutional provisions and no government could have denied NHP to the province. However KP government must stick to the QF. But we would also like to know as to what happened to the Hydel Development Fund and the money provided thus far,” he adds.

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About Tahir Ali Khan
I am an academic, freelance columnist, writer and a social worker.

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