Inter-ministerial panel in agreement: WUCs to AJ&K will be paid from NJHPP commissioning date

ISLAMABAD: An inter-ministerial panel has agreed in principle that Water Use Charges (WUC) to Azad Jammu & Kashmir (AJ&K) will be paid from the date of commissioning of the Neelum–Jhelum Hydro-power Project (NJHPP) and Power Division will approach National Electric Power Regulatory Authority (Nepra) for finalisation of the project’s tariff petition to enable the payments, well informed sources in Ministry of Water Resources told Business Recorder.

The contentious issue of WUC payments to AJ&K has been under discussion at various forums, including a ministerial committee dealing with AJ&K political affairs.

Earlier, on September 16, 2025, the Working Committee of the Inter-Provincial Coordination (IPC) decided that: (i) WAPDA, through the Ministry of Water Resources and the Government of AJ&K, would work out the actual details of retrospective and prospective WUC payable from NJHPP for presentation before the Steering Committee; and (ii) the Government of AJ&K would present the issues pertaining to the draft bilateral agreement on NJHPP for deliberation.

In its recent meeting, chaired by the Secretary IPC, the Working Committee discussed: (i) the mechanism for payment of WUC to AJ&K; (ii) framing of outstanding issues of AJ&K; (iii) the agreement between the Government of AJ&K and WAPDA, particularly the role of the Central Power Purchasing Agency-Guaranteed (CPPA-G); and (iv) the report of the inquiry commission on the collapse of the NJHPP headrace tunnel.

Director General (Water Resources) Saleem Shahid informed the committee that NJHPC and WAPDA had calculated retrospective WUC payable from 2018 to 2024 at Rs 21.7 billion, at the rate of Rs 1.10 per kWh, while prospective WUC were estimated at Rs 5.6 billion.

Secretary Energy and Water Resources Department, AJ&K Muhammad Tayyab agreed with the figures but stated that the AJ&K government would reconcile them with NJHPC/WAPDA.

The Chief of the P&M Wing referred to the 2019 decision of the Economic Coordination Committee (ECC) and the subsequent 2022 amendment to the Mangla Dam Raising Project (MDRP), under which WUC were to be paid prospectively for Mangla, Neelum Jhelum and future projects, subject to tariff determination and recovery through tariff.

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GM Finance WAPDA Syed Irfan Rizvi apprised the committee that the tariff petition for NJHPP remains pending before Nepra and that only an interim tariff is currently applicable.

DG Hydro, Private Power and Infrastructure Board (PPIB) observed that at the time of the 2019 ECC decision, both Mangla and Neelum Jhelum hydropower stations were operational, and the 2022 amendment to MDRP was binding on both. However, Secretary E&WR AJ&K maintained that the 2022 amendment primarily related to MDRP and that reference to Neelum Jhelum was incidental.

The CFO of CPPA-G pointed out that the additional cost arising from prospective WUC would have to be determined by Nepra through tariff. He referred to Nepra’s July 2024 notification, under which tariff had been determined for Mangla Power Station but not for NJHPP.

The Chair observed that Nepra lacks jurisdiction in the case of AJ&K. The Secretary E&WR AJ&K added that the AJ&K government was not part of the deliberations that led to the July 2024 notification.

A WAPDA representative informed the committee that payment of Rs 1.10 billion for MDRP has not been processed since July 2024. He added that WAPDA had filed a petition regarding payment of charges agreed under the February 11, 2022 agreement.

The DG, Ministry of Water Resources, stated that two WAPDA petitions are pending before Nepra: one relating to arrears of Rs 6 billion and the other to tariff determination for NJHPP. He said tariff determination remains unresolved due to pending third-party validation awaited from the Ministry of Planning, Development and Special Initiatives.

Deputy GM WAPDA clarified that only an incomplete interim tariff is applicable to NJHPP, covering 90 per cent of O&M and part of debt servicing.

Secretary E&WR AJ&K informed the committee that the AJ&K Cabinet has vetted the draft bilateral agreement on NJHPP and forwarded it to the federal government (Ministry of Water Resources, IPC and KAGB). He noted that no WUC were paid for Mangla from commissioning until 2004 and argued that prospective WUC payments from NJHPP alone would not be a just arrangement.

DG, Ministry of Water Resources, responded that any decision on retrospective payments would require recourse to the ECC.

The CFO CPPA-G added that additional costs arising from WUC payments would have to be borne by the Finance Division.

Joint Secretary Finance Division Naeem Javaid stated that the federal government is already providing over Rs 75 billion in Tariff Differential Subsidy (TDS) to AJ&K. He said that WUC payments would ultimately have to be passed on to electricity consumers in Pakistan, adding that either TDS or WUC may be allowed to AJ&K.

Director WR, Ministry of Water Resources, reiterated that under the February 2022 amendment to MDRP, the AJ&K government had agreed to prospective payments. However, the Secretary E&WR AJ&K argued that a new bilateral agreement on NJHPP would constitute a specific legal arrangement, superseding general provisions.

DG Hydro PPIB cited the example of the private project Sukki Kinari, for which the ECC approved WUC payment at Rs 0.42 per unit from the commercial operation date (COD), underscoring that the principle of COD is well established. He added that CPPA-G would not be in a position to pay WUC until NEPRA decides the pending tariff petition.

After detailed deliberations, the meeting agreed in principle to payment of WUC to AJ&K from the commissioning date of the Neelum Jhelum project, with the matter to be placed before the Steering Committee for further consideration.

It was further decided that the Ministry of Water Resources will convene a meeting of all stakeholders to finalise modalities and a way forward for WUC payments and to reach consensus on signing the draft bilateral agreement in February. The Power Division will also take up the matter with Nepra and other relevant authorities for early finalisation of the tariff petition.

Copyright Business Recorder, 2026