ISLAMABAD, Oct 9: The arbitration tribunal on the hydel profit dispute between the NWFP and Wapda on Monday unanimously concluded that the power utility should make a net additional payment of Rs110.4 billion to the NWFP within five years as arrears of Tarbela Dam profit.
The decision would greatly supplement the province’s finances, besides consolidating MMA’s political position ahead of the general elections.
The five-member tribunal, headed by former chief justice of the Supreme Court Ajmal Mian, handed over its final award to the respective parties in the presence of their counsel, ending a 14-year-old legal battle. The tribunal’s award is binding, comes into force at once and cannot be challenged in any court of law.
Abdul Hafeez Pirzada, counsel for the NWFP, described the award as a major political victory for the MMA government, saying the provincial government had ‘fought an outstanding case very successfully’ unlike their predecessors who had barely struggled on the issue.
He said that the award would make it possible for the NWFP government to take in hand a number of hydro-electric and other development projects that had been stalled for years because of shortage of funds. He said the federal government had provided sovereign guarantee to ensure the award’s payment to the province.
In their separate notes the tribunal’s three arbitrators, however, suggested on separate grounds to scrap the A.G.N. Kazi formula of 1986 because of a ‘sea change in circumstances’ since then, but all of them agreed to the amount of Rs110 billion in arrears, computed under the said formula that put NWFP’s net hydel profit for 2004-05 at Rs24 billion, Wapda’s arbitrator Manzoor A. Sheikh told Dawn.
Besides the principal amount of Rs10.4 billion, the tribunal also ordered Wapda to pay 10 per cent mark-up to the NWFP from now onwards on the amount. The total amount payable by Wapda to the NWFP at the end of the five-year period would be about Rs135 billion. The award seeks payment of the first instalment in three months. The remaining instalments would be payable before Dec 31 every year, which means the second tranche would be due on Dec 31, 2007.
In his 87-page award, Justice Ajmal Mian adopted the base amount of net hydel profit at Rs6.088 billion for the year 1989-90 as reported by a committee of the National Finance Commission on the instructions of the Council of Common Interests (CCI) of Jan 12, 1991. The said committee had also agreed to a 10 per cent increase in hydel profit for future computation of the A.G.N. Kazi formula.
Jusctice Ajmal Mian computed the total amount of NWFP’s net hydel profit since 1991 to be Rs193.763 billion. Of this, Wapda had over the years paid Rs86 billion to the NWFP.
Mr Manzoor Sheikh told Dawn that NWFP’s arbitrator Abdullah supported Justice Ajmal’s decision to accept 10 per cent annual growth in hydel profit while Prof Khurshid Ahmad supported it on the basis of dynamism of the constitution and principles of equity.
Wapda’s arbitrator Javed Akhtar criticised the A.G.N. Kazi formula and contended that the formula should logically be abandoned. Mr Akhtar also quoted balance sheets and thermal power production figures of Wapda and justified his claim that while Wapda was running in loss owing to high cost of thermal power, the NWFP’s profits were increasing. Mr Sheikh quoted Mr Akhtar as saying that the formula was not workable any more and should be scrapped.
Mr Sheikh, who is a former Wapda member finance, said he had computed NWFP’s arrears at Rs197 billion on the basis of the Kazi formula but gave consent to the amount worked out by chief arbitrator Justice Ajmal Mian.
He, however, said that in his separate note he had written that the tribunal had gone outside the terms of reference notified by the federal government. The tribunal was required to interpret the Kazi formula on its own and was not entitled to adopt 10 per cent annual growth claimed by a committee.
He said he had also written that the A.G.N. Kazi formula was no longer workable given Wapda’s higher dependence on thermal power and upcoming Bhasha dam and other hydel project whose effects would not be bearable for the federation. Therefore, it should be scrapped immediately. He said that since Wapda was facing a cash deficit of about Rs50 billion at the end of June 30, the federal government would have to make allocations in the federal budget to pay about Rs24 billion or so every year to the NWFP.
He said he also proposed that the three sides — federal government, Wapda and NWFP — should sit together immediately to agree upon an effective date of implementation and set a payment schedule.
Mr Sheikh claimed that Prof Khurshid Ahmed, who was NWFP’s arbitrator, had also suggested the scrapping of the Kazi formula.
NWFP’s counsel Abdul Hafeez Pirzada, however, denied that any member of the tribunal had written any dissenting note or had called for scrapping the formula.
Mr Pirzada said the arbitration award was historic and the biggest claim contested by a deficit province. He said the arbitration tribunal had struck a balance and worked out the net profit from 1991-2 to 2004-05 that started with Rs7 billion and escalated to Rs24 billion in 2004-05.
He said the tribunal did not entertain NWFP’s claim to the annual mark-up since 1991 on the ground that it was outside its terms of reference, but the province was ‘satisfied with the outcome’. He said the NWFP’s total claim amounted to over Rs300 billion.
The five-member tribunal formally started its proceedings on Nov 9, 2005, to resolve the longstanding dispute between the NWFP and Wapda over computation of net hydel profit under articles 153, 154 and 161 of the Constitution.
The tribunal was appointed by the federal government through a trilateral agreement signed by the NWFP, Wapda and federal ministry of Water and Power to decide the dispute within a period of six months that was extended for another six months i.e. October 31, 2006.
The NWFP was represented in the tribunal by Senator Khurshid Ahmed and Abdullah, chairman of the NWFP’s Public Service Commission. Former Wapda members for power and finance Javed Akhtar and Manzoor A. Sheikh, respectively, represented Wapda in the tribunal.
