KHYBER Pakhtunkhwa’s development programme has suffered a setback as the province’s net hydropower profit arrears from the electricity generated at the Tarbela Dam have been stuck up for over six years and reached Rs101bn.

The provincial government officials say the federal government is using delaying tactics despite its promise to the province in mid-May to expedite the clearance of the held-up amount.

KP has been receiving a capped amount of Rs6bn every year from Wapda on account of net hydropower profits since the early 1990s. This promised amount has not been paid in full over a period of time.

The province has been receiving a capped amount of net hydropower profit of Rs6bn every year from Wapda

In a meeting with provincial officials, a federal government team led by Finance Minister Ishaq Dar had promised to resolve the issue in a month through a high-level committee.

KP Finance Minister Muzaffar Sayed says the issue has already been taken up with the federal government. “We have been given verbal assurance that it will be resolved in a month.”

The minister, however, blames the federal government team, whose members are mostly from Punjab. Sayed says they are pursuing the interest of Wapda only and adds that there is no effective representation of KP at the federal level to force Islamabad for an early settlement of the issue.

Asked whether the centre is backtracking from its promises, he said there is no such indication, but delaying tactics are being employed. This attitude is a major bottleneck in the province pursuing its development schemes.

The KP government is constantly pushing Islamabad to uncap its annual net hydropower profit share — fixed at Rs6bn — and is demanding an amount of Rs42bn annually on this account. No understanding has been reached on this claim so far.

A KP government official argued that the cap on hydropower profits was an injustice to the province. He said that the province’s stance had been acknowledged by an arbitration tribunal headed by former Chief Justice Ajmal Mian and the A.G.N. Qazi committee as well.

The tribunal had declared in 2005 that the province should be given Rs25bn annually as its share in the profit earned on the sale of hydropower generated in KP. It had also proposed that this share should be increased by 10pc every year. As per the decision, the province’s share stood at over Rs42bn by 2014-15.

At the time of the finalisation of the 7th National Finance Commission (NFC) Award in 2009, the federal government had also promised to uncap the province’s share in hydropower profit from the Tarbela Dam from Rs6bn per annum and raise it to Rs10bn immediately, and then set a mechanism in place for increasing it to Rs28bn the following year along with the payment of some arrears.

The then-PPP government had paid Rs10bn in the first year of the Awami National Party’s government in KP, but these payments were then blocked by the centre and Wapda. As a result, the province was deprived even of its previously capped share of Rs6bn, to say nothing of getting a higher share.

Some experts believe that it is time that the issues are discussed in the Council of Common Interests (CCI). There might be a need for making an amendment in the constitution as well.

The KP-Islamabad issues are not only confined to the clearance of past arrears but also development works. The construction of the Munda Dam on River Kabul is moving at a slow pace, and the KP government’s proposal for constructing two barrages on River Swat is in cold storage. There are several other hydropower projects that are awaiting clearance from the federal government.

The provincial government has given over Rs5bn to Wapda for the installation of new transformers and transmission lines to provide electricity to domestic and industrial consumers in the province. There is a shortfall of 660MW in electricity supply to KP, leading to widespread unannounced load-shedding.

The major impact of the power outages is mainly on the small businesses, which are now relocating to other provinces, especially Punjab.

With the shortfall in the federal transfers of payments under the NFC award, the provincial budget deficit is expected to rise. However, the KP finance minister says it will be too early to say whether the shortfall in transfers will be adjusted by cutting current expenditures or provincial development spending.

Published in Dawn, Economic & Business, July 27th, 2015

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