October 23, 2006	Monday	Ramazan 29, 1427

THE unanimous decision by a five-member tribunal to raise NWFP’s share in net hydro profit (NHP) has come as a big victory for the Muttahida Majlis-e-Amal (MMA) government ahead of the coming general elections.

The tribunal was formed last year to resolve differences between the NWFP MMA-led government and Wapda over sharing of hydro profits. It was a long standing demand of the province for an increase in its annual NHP share, capped at Rs6 billion.

Upholding NWFP’s demand as legitimate, the tribunal has asked Wapda to pay an additional amount of Rs110.1 billion to the province on account of arrears for a 14-year period starting from 1991-92.

The entire amount is to be paid in five annual instalments of Rs22 billion each. The tribunal declared that the province has a right in the light of the relevant provisions of the Constitution and decisions of the Council of Common Interest (CCI) to receive the additional amount.

While all the five members of the tribunal agreed over the amount of Rs110 billion, three arbitrators-– one representing NWFP and two belonging to Wapda-–in their separate views held that the formula on the basis of which NWFP’s share was calculated, needs to be scrapped for not being in consonance with the ground realities.

Whether the province receives the funds from Wapda or not, the decision has come as a big boost for the MMA. The religio-political parties alliance is conveniently placed to mould public opinion in its favour as it has succeeded in getting its long standing demand accepted despite being in the opposition to the federal government.

“ The decision is important because the tribunal accepted NWFP’s stand that the net hydro profit share be calculated in accordance with the AGN Kazi committee formula, which Wapda refused to honour since 1991-92, said a finance manager of the province.

The official particularly referred to the remarks of the tribunal’s chairman in which he said: “In my view the CCI decisions dated January 12, 1991 is to be read in conjunction with three subsequent decision dated Sep 12, 1993/ May 25, 1997 and Dec 22, 1998, whereby the CCI assured the provinces that the hydro profits payable to them under the Constitution would not fall below the level which these would have obtained, had there been no privatisation. This assurance has become part and parcel of the Kazi Committee methodology and, therefore, the same is to be honoured even if the above methodology may need some variation or modification.

The three subsequent decisions of the CCI manifests its predominant intention to ensure that the provinces should have a fair deal and that they should get hydro profits not less than the above level”.

The tribunal calculated NWFP’s share for 1991-92 at Rs6.92 billion in accordance with the Kazi Committee formula. The annual share, under this formula, stood at Rs23.9 billion in 2004-05 by increasing the annual share by 10 per cent every year to offset inflation.

Though the decision has apparently benefited the province at the cost of Wapda, the same has not been in line with the expectations of NWFP which had lodged a case for recovering Rs595 billion from Wapda.

Similarly, the arbitration tribunal’s decision pertains to the 14 year period starting from 1991-92 financial year, while the provincial government had submitted a claim for the recovery of arrears since the adoption of the Constitution in 1973.

Out of Rs595 billion claimed as arrears, an amount of Rs376.5 billion had been demanded as principal share amount and remaining Rs302.7 billion had been claimed on account of interest over and above the original share amount.

However, against the original claim of Rs376.5 billion, the arbitration tribunal acknowledged Rs193 billion for the period 1991-92 to 2004-05.

It did not consider the provincial government’s claim pertaining to period before 1991-92 financial year for being out of the purview of its terms of reference (TORs) set under the agreement between the two sides.

Similarly, the Tribunal rejected Wapda’s claim of over Rs10 billion against the provincial government.

The Authority had stated that it paid an amount of Rs10.9 billion to the province, between 1991-92 to 2004-05, in excess of its original share of Rs72.7 billion.

On the face of it, the issue does not appear to end here as Wapda being the aggrieved party and deep in financial problems, may not be able to comply with the decision.

A Wapda spokesman said that the Authority would come up with final response to the Tribunal’s award after a detailed review of the same by its legal experts.

The spokesman has been quoted as saying that “ the preliminary study of the award by the tribunal indicates that the award is not in accordance with the TOR’s of the tribunal”.

The provincial government’s officials said the decision of the Tribunal should be accepted by Wapda.

Wapda’s financial worries do not end with a Rs110 bn liability.

The Authority’s concerns go much beyond the verdict and the final figure of arrears. If it accepts to comply with the tribunal’s decision, it will set a precedent for the future. After NWFP, Punjab, which would shortly start receiving NHP against the sales proceeds of power generated by Ghazi Barotha hydro power project, would also be eligible to get its NHP share calculated on the basis of Kazi Committee formula – which is the another source of concern for Wapda and to a greater extent for the federal government as well.

“Till the time CCI does not scrap the Kazi Committee formula, the provinces’ share on account of NHP will have to be calculated by applying the said formula which is, at present, the sole parameter to determine NHP share of federating units housing hydro power stations,” said an official.

In the light of the tribunal’s decision, the NWFP government is hopeful of getting over Rs51 billion as its share of net hydro profit for 2005-06 and 2006-07, the official added.

This amount if agreed by Wapda, would come over and above an amount of Rs110.1 billion which the Authority is required to pay to the province in line with the tribunal’s decision.

As the Tribunal’s has accepted NWFP’s demand, the province would now want to get the annual net hydro profit share beyond 2004-05 financial year in accordance with the AGN Kazi committee formula.

“As the Tribunal has applied the AGN Kazi committee formula for the 14-year period in dispute, therefore, till the time of its being scrapped, the formula would remain enforced,” said a legal expert.

Officials said that in accordance with the AGN Kazi committee formula, the NWFP share of net hydro profit for 2005-06 came to Rs26.3 billion and Rs28.9 billion for 2006-07..

The province had received Rs6 billion as net hydro profit in 2005-06 in line with its capped share amount which it has been receiving every year since 1991-92.

According to official sources, the province should get another Rs20.3 bn as remaining of its net hydro profit share for the 2005-06 , whereas, another amount of Rs2 bn should come to the province, by applying 10 per cent mark up rate over and above the remaining amount in line with the tribunal’s decision.

The provincial government also intended to make a formal request to Wapda to pay NWFP’s net hydro profit share for the current financial year in accordance with the AGN Kazi committee’s formula. The province should receive Rs28.9 billion in 2006-07, said the sources.