PESHAWAR: The annual net hydel profit of Khyber Pakhtunkhwa is likely to surge from Rs20.75 billion to Rs85 billion as the Council of Common Interest has agreed on the implementation of the 1991 AGN Kazi formula for the determination of that profit, officials insist.

The details available with Dawn show that Chief Minister Pervez Khattak took up the NHP issue at the April 24 CCI meeting and sought the implementation of the forum’s previous decision.

In its 34th meeting on Dec 24, 2017, the CCI had referred the matter to the Inter-Provincial Coordination Committee (IPCC) for filing recommendations.

Development comes as CCI agrees to enforce AGN Kazi formula for NHP calculation

The IPPC later recommended the implementation of the AGN Kazi formula for the calculation of the NHP for payments to the provinces.

The AGN Kazi was formed in July 1985 to frame a formula for the calculation of the NHP to the provinces and was headed by Planning Commission deputy chairman AGN Kazi.

The committee finalised its report two years later, in July 1987 to be exact, which was approved by the CCI in Jan 1991.

Article 161 (2) of the Constitution states, “the net profits earned by the federal government or any undertaking established or administrated by the federal government from the bulk generation of power at hydro-electric station shall be paid to the province in which the hydro-electric station is located.”

However, the official documents show that federal minister for power Awais Ahmed Khan Leghari expressed reservations about the AGN Kazi formula, saying it doesn’t predict the quantum of profits to be calculated at that time at the busbar as the electricity generation is a mix of the thermal, coal and hydel resources.

The minister told the meeting that at the time of the Kazi formula’s approval, Wapda was broken up in 2007.

He added that the power generation remained the exclusive domain of Wapda until then and that the tariff determination was the responsibility of the Finance Division until the creation of the Nepra.

The minister said currently, Wapda only recovered costs of power generation and that it was not a profit generating entity.

The document notes that during the discussion on the subject significant difference of opinion of emerged between the provinces and centre on the mechanisms for determination of costs associated with generation, distribution, transmission, line losses and NHP calculation.

“The prime minister underlined that importance of reconciliation of figures payable to the provinces,” it said, adding that KP government stressed upon the implementation of the CCI decision regarding AGN Kazi formula.

The document said the KP government, however, agreed to the reconciliation of the NHP figures and rates.

It added that the CCI in principal reiterated its decision on the implementation of the AGN Kazi methodology and constituted a committee to examine the issue of the determination of rates and net profits and submit report and recommendation in the forum next meeting.

The committee will comprise deputy chairman of the Planning Commission, water and power and inter-provincial coordination secretaries, and chief secretaries of KP and Punjab.

Currently, the KP government is getting Rs20.75 billion as NHP under a memorandum of understanding signed between the province and federal government on Feb 25, 2016.

Officials in Peshawar told Dawn that after the implementation of the AGN Kazi formula, KP would get additional funds of Rs65 billion per annum and thus, taking the total annual amount of net hydel profit to Rs85 billion.

Prior to the 2016 MoU, the province’s NHP was capped at over Rs6 billion.

However, under the MoU both sides agreed that uncapped NHP, as determined by Nepra would be notified by the water and power ministry.

Both sides also agreed that the arrears of the uncapped NHP came to Rs70 billion after the reconciliation of mutual claims in the power sector between the centre and province as full and final settlement.

They also agreed that Wapda after getting the concurrence of the CCI through the water and power ministry would file a tariff petition with the Nepra for the recovery of arrears in four installments of Rs25 billion in 2016 and three installments of Rs15 billion each over the next three years.

Published in Dawn, May 10th, 2018