PESHAWAR: The Khyber Pakhtunkhwa caretaker government has formally urged the federal government to immediately make the outstanding payment of Rs62 billion net hydel profit to it and increase the rate of profit.

In a letter, Chief Minister Mohammad Azam Khan urged Prime Minister Shehbaz Sharif to act on Article 161(2) of the Constitution, which declares that the net profit 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 letter, a copy of which is available with Dawn, read that the Constitution provides for the payment of NHP to the provinces at the rate determined by the Council of Common Interest.

According to it, the Kazi Committee Methodology (KCM) was approved by the CCI in Jan 1991, while the first payment of Rs6 billion was made to KP (then North Western Frontier Province) next year.

In letter to PM, CM also demands profit rate hike

The KCM was endorsed by the National Finance Commission in 1988 and the Supreme Court in 1997. It was subsequently okayed by the CCI in 1991, 1993, 1997, 1998, 2016, 2018 and 2019, the CM noted in the letter.

Mr Khan said that in 2016, the federal government, realising KP was in dire straits and on the instruction of the then prime minister, Nawaz Sharif, announced an interim NHP agreement brokered by then finance minister Ishaq Dar.

He added that the agreement provided for the NHP payment of Rs1.10 kwh with a hike in Wapda generation tariff with an effect on consumer tariff of approximately 30 paisa per unit.

“The Wapda started payment to Punjab and KP accordingly. However, the flow of payment was not regular as per interim agreement resulting in a shortfall of Rs62 billion in 2022-23. It may be kept in mind that the average national tariff has increased from Rs10 kwh to Rs34 kwh, showing an increase of 340pc,” he said in the letter.

The CM said that the KP government later took the issue of the implementation of KCM to the CCI and the then prime minister, Nawaz Sharif, constituted a committee headed by the deputy chairman of the Planning Commission to deliberate upon the issue of the determination of rates and net profit in light of the CCI decisions.

He added that the committee, in its report submitted to the CCI in Dec 2019, declared that the KCM had attained finality in view of the numerous unanimous decisions of the CCI spanning over four decades and it could no longer be reopened.

The committee also asked the federal government to ensure direct payments to the provinces to discharge its constitutional responsibility, he said.

Mr Khan said that the CCI endorsed calculation of Rs128 billion as KP share and Rs52 billion to Punjab as the NHP for the year 2016-17 was based on the KCM, while another committee was formed to propose an out-of-box solution to the NHP payment issue.

“Three important points emerged out of out-of-box solutions committee deliberations, which were completed in 2022 and which included transfer of hydel power stations to the provinces, construction of hydel generation powers from the federal public services development programme and announcement of 2nd interim agreement with an enhanced rate of the NHP,” he said.

The CM asked the prime minister to place the out-of-box committee report before the CCI for consideration.

“In the meanwhile, a second interim agreement may be announced with an enhanced NHP of Rs2 per kwh and 10pc increase in Wapda generation tariff with an effect of Rs1 per kwh on consumer and tariff,” he said.

Mr Khan asked the prime minister in the letter to ensure an immediate payment of Rs62 billion NHP arrears to the province directly by the Central Power Purchasing Agency.

Published in Dawn, May 6th, 2023