Billions of rupees of net hydel profit (NHP) collected from consumers and payable to the provinces is being paid to expensive independent power producers (IPPs) for subsidy and tariff adjustment in violation of decisions of the Council of Common Interests (CCI) and Supreme Court. This was observed by the Senate Standing Committee on Water Resources which met with Shamim Afridi in the chair here on Tuesday.
Leader of the House in Senate Shibli Faraz criticized the State Bank of Pakistan, saying it is overstepping its mandate while hinting at scrapping the AGN Kazi formula in its 3rd quarterly report 2018-19. The committee discussed the question raised by Senator Mushtaq Ahmed in the House regarding the payment of royalty on account of electricity generation to the province of Khyber Pakhtunkhwa under the AGN Kazi formula and the reasons of delay in payment so far.
Mushtaq said that NHP is not being paid in the light of CCI, National Finance Commission (NFC), Federal Cabinet and SC decisions and interpretation. However, in violation of all the four fora, WAPDA has opened new Pandora's box while disputing the AGN Kazi formula for not paying NHP arrears which is also contempt of court. Mushtaq said that according to the committee headed by Minister for Planning and Wapda, the Kazi Committee Methodology (KCM) is a failure and not in line with the Constitution, so it is not implementable.
He further said in September 2018, Prime Minister Imran Khan directed the planning minister-led committee to present its report to the CCI within a month but the issue stands unsettled. Further, the Planning Ministry has deviated from its mandate as it has no right to comment on the KCM methodology. "By attempting to reopen KCM, Planning Ministry/ Power Division is assuming a role which the CCI has nowhere entrusted to it," as committee role was to determine NHP amount paid to province and they are attempting to make it controversial by opening a new Pandora's box.
Adviser to Chief Minister KP on Energy & Power Himayatullah Khan insisted that the contention that the KCM is not in line with the Constitution is not only irresponsible but it also amounts to insubordination, defies the repeated decisions of CCI and is contempt of the Supreme Court's 1997 decision regarding NHP payment.
He said the KCM was developed through consensus of all stakeholders, including the Center, KP, National Finance Commission, federal cabinet and CCI, with the SC putting a final seal on the matter with its 1997 judgement, so there is no need for reopening a settled matter as it would lead to further complications.
He said it was very irresponsible to say that the KCM is detrimental to national interest and that the reopening of a settled matter is tantamount to putting the national interest in jeopardy.
The committee recommended that KCM methodology, which dealt with the provinces' share in NHP, should not be altered/ disputed, directing the Wapda to give a timeframe for payment of the pending royalty and pay the outstanding amount in dollars.
The member finance WAPDA informed the committee in writing that a committee (headed by AGN Kazi the then deputy chairman Planning Commission) developed a methodology (called KCM) for working out NHP payable to the provinces, which was approved by the CCI in 1991. However, there were certain fundamental limitations embedded in the internal structure of the AGN Kazi Committee Report which are not in line with the spirit of the constitutional provisions and also gave rise to the conflicting claims and different interpretations by GoKP (previously NWFP) and Wapda due to which the KCM could not be implemented.
In August 1992, the GoP mediated on the issue and directed Wapda to pay NHP of Rs 500 million per month to GoKP as ad hoc payment, subject to adjustment after computation of NHP by the Auditor General Pakistan as per KCM. However, the GoKP did not agree on computation of NHP made by the Auditor General of Pakistan. Subsequently, the GoP formed an arbitral tribunal in 2005 which observed the KCM as impracticable.
The tribunal announced its award in 2006 and worked out arrears of Rs 110 billion which the federal government settled from its own sources. However, the NHP issue still could not be fully resolved. The difficulties inherit in the KCM were compounded after unbundling of WAPDA into 13 separate distribution, transmission and generation companies. After granting license to WAPDA, NEPRA included annual NHP of Rs 6 billion for GoKP after soliciting clarification of Ministry of Finance.
This amount was allowed by NEPRA up to fiscal year 2014-15 and WAPDA regularly paid NHP to GoKP after making recovery through its tariff. Subsequently, on the demand of GoKP and as per decision of the GoP, the NHP was uncapped by NEPRA @ 1.10 per/kWh. The long outstanding issue of rate and arrears of NHP was finally settled with mutual agreement of GoP and GoKP through signing of MoU in 2016 providing that: (a) The un-capped NHP, as determined and transmitted from NEPRA, would be notified immediately by the Ministry of Water and Power; (b) A total amount of Rs 70 billion has been agreed upon on account of arrears of uncapped NHP after reconciliation of mutual claims in the power sector between the two governments as full and final settlement; (c) WAPDA, after seeking concurrence of CCI, would file tariff petition for recovery of arrears in four instalments as follows: (i) Rs 25 billion in fiscal year 2015-16 and (ii) Rs 15 billion each in next three years.
For fiscal year 2017-18, the NHP rate has been further increased vide Nepra determination dated 22.11.2017, from Rs 1.10/kWh to Rs 1.155/kWh. However, the GoKP again approached CCI for calculation / payment of NHP as per old and redundant KCM formula of 1991.
The Wapda's stance is that the CCI decisions dated 29.02.2016 and 16.12.2016 override the earlier decision of CCI of January 1991 regarding KCM which has become infructuous. The WAPDA was and even now just recovering cost of generation as provided in WAPDA Act 1958 and not earning any profit on the sale of electricity.
The NHP is a pass-through cost over and above Wapda's cost of generation and any increase in NHP, by whatever means and manner, will escalate the already high prices of electricity and thus ultimately impose additional burden upon electricity consumers.
The committee held a thorough debate on the compensation issue of Mirani Dam flood-affected people and recommended a list, containing 1,816 people, compiled and approved by the quarters concerned in 2015, for payment.
It was informed that there were about four to five lists of the affected people, prepared since 2007 after a cyclone Yemyin hit Balochistan coast on the night between June 26 and June 27, back-flowing water from Mirani Dam in the Nihing and Kech rivers.
All the five lists have conflicting facts and figures about the number of affected people and damage, which is one of the problems in disbursement of the compensation amount, officials from the Balochistan province informed the body. Upon this, the committee looked into the issue in detail and unanimously approved the list of 1,816 affected people, which was endorsed by the quarters concerned for the payment.
Following which, the committee was apprised that there was a binding by the Executive Committee of National Economic Council (ECNEC) that the compensation would be given after damages and disbursements' verification through the third-party.
Unfortunately, a third-party team had visited the affected areas in 2012 but could not find the 'visible' damages occurred to the orchards, trees and households as the flood had washed away everything, the officials said.
After deliberating on the possibility of relaxing the ECNEC condition of third-party's involvement, the committee called in the Secretary Planning Commission in the next meeting to find a way forward and form a provincial level third-party for the compensation payment.
The committee also expressed concern over the continued absence of chairman Wapda and chief secretary Balochistan from the meeting, issuing directives for the both to appear in next meeting without any further excuse. Senator Sassui Palijo, on another agenda item, raised serious concerns over the increasing sea intrusion in different coastal districts of Sindh.
Around 24 acres of land per day was going into the sea, which was also damaging 26 acres of land per day along the coastal belt, she added. The committee sought a detailed briefing on the issue in next meeting from Wapda and the National Institute of Oceanography.
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