Still unpaid : Sans NHP payment, K-P inches towards fiscal crunch

Published: January 18, 2016



The Khyber-Pakhtunkhwa government’s recent failure to compel the Centre to release net hydel profit (NHP) arrears and its due principal amount has pushed the province closer to a financial crunch.

“The K-P government has to adjust the gap between its revenue and expenditure either by cutting current expenditures or the Annual Development Programme funds,” said a former provincial government official privy to the matter. “The government has to freeze schemes in the ADP or stop recruitment.”

One official even said the K-P government was already facing financial challenges and was “looking to borrow money from somewhere”.

“The monthly salaries of its employees cost Rs6.5 billion and the provincial administration desperately needed money to complete its development projects,” said another senior official, requesting anonymity. The official added the financial challenges were among the main reasons the K-P government has been pushing the Centre to release arrears as well as the principal amount.

A major chunk of K-P’s budget for fiscal year 2015-16 is based on the NHP and arrears owed by the federal government. Insiders said the Centre, during the last meeting with provincial authorities on December 30, 2015, tricked the K-P administration.

“Federal Minister for Water and Power Khawaja Asif said the meeting was to continue for a second day, but they (central leaders) did not show up,” said an insider. He added Federal Minister for Inter-Provincial Coordination Riaz Hussain Pirzada, federal secretary for water and power, and officials of the finance department had represented the federal government in the meeting.

Chief Minister Pervez Khattak went for the meeting personally with the provincial finance secretary, energy and power secretary and Minister for Energy Atif Khan. The K-P government’s legal adviser was Shumail Ahmed Butt.

Difference in MO

Khattak stressed on the payment of Rs45 billion from the NHP for FY 2005-06 up till 2012 in addition to Rs56 billion as mark-up on the unpaid award amount.

“The finance department will pay the mark-up [Rs56 billion] and the federal government wants the amount to be paid in instalments but the K-P government wants it in one go,” said an official familiar with the matter.

The official said the federal government wanted to adjust the arrears and principal amount for seven years (2005-06 to 2011-12) with the electricity tariff.

“However, the CM wants the money to be released for the K-P government and not be adjusted in the tariff,” he said.

Tariff differential subsidy

He added the federal government also claimed Rs18 billion in outstanding dues owed by the K-P government. The federal government has claimed the amount on account of the tariff differential subsidy which was eliminated in 2011. However, few people went to court against the elimination of the subsidy.

“When the federal government agreed to pay Rs110 billion in arrears, it was decided petitions related to the differential subsidy would be taken back,” the official explained. He stated the federal government calculated Rs18 billion against the K-P government for making use of the differential subsidy despite the fact that it was eliminated.

“The federal government wants to deduct the Rs18 billion from the Rs45 billion arrears and adjust the Rs27 billion in the electricity tariff, paying the amount over three to six years,” said the official. “We want the federal government to sit and discuss the Rs18 billion outstanding against us. If the people of K-P, along with many federal government entities, also used the differential subsidy then should we be responsible for paying their debts?” asked the official.

Help from Centre

He added the provincial government would be in a financial crisis if NHP arrears and mark-up sums were not paid in time. “The provincial government is in hot water right now and the situation will get worse if the Centre does not support it to balance expenditures and revenues.”

Talking about the next meeting and consultation, the official said the chief minister was going to Scotland and the meeting would be held upon his return. K-P Minister for Finance Muzaffar Said was not available for comments despite repeated attempts.

Published in The Express Tribune, January 18th, 2016.

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Reader Comments (13)

  • syed & syed
    Jan 18, 2016 - 3:49AM

    Right of KPK should be paid .by the Central Government in one go and not installments. Try this trick Nawaz Shareef in Punjab. Shabaz will get you from his claws.Recommend

  • Abdullah
    Jan 18, 2016 - 10:45AM

    Worse management of KPK ever .Raise some taxes imran khan from KPK like we in punjab are forced to pay.Stop doing politics and start building KPK.With out taxes no province can develop.After 18th ammendment lot have changed and you have to collect taxes.Recommend

  • vick
    Jan 18, 2016 - 11:19AM

    @ Abdullah

    So you saying that KPK should stop asking for its due right from centre? Whenever N-League government comes into power it gives rise to provincialism by pursuing policies of favoritism towards punjab. Recommend

  • Abdullah
    Jan 18, 2016 - 12:37PM

    @vick.Not at all.they should claim all the amount and i strongly believe that they should be given the amount in one go all together in cash.
    But saying thtat the KPK gov is going to have a financial crunch.That shocks me.What were the people in finance department doing couldnt they predict this .Its not been form now the problem exists from ages.Thats worse managemet.Recommend

  • Ishrat salim
    Jan 18, 2016 - 1:37PM


    I agree with you, but the previous govt of ANP did nothing but loot & plunder in sync with DCenter & provincial PPP people. Now, those unpaid revenues will definitely haunt the present govt, is not it ? KPK govt has been demanding its due share since they formed the govt in KPK. These unpaid revenues by FM Mr Dar in a various TV talks, but when it come to releasing KPK govt dues remain a mystery, NO ! those amounts have been transferred to Punjab for their different mega projects, that is why the Center / Mr Dar cannot release thus making excuses. Recently, when KPK CM warned of protest in front of Parliament against its legitimate right, Mr Dar assured him to resolve the issue to avoid such an embarrassing situation, but PML N govt is a master in making such U turn.Recommend

  • Mamu
    Jan 18, 2016 - 2:26PM

    Agree on you second comment. In comparison they are relatively new to this field. Hardly just 2 years experience. They do make mistakes, But the best thing is that they learn from their mistakes.Recommend

  • azmat
    Jan 18, 2016 - 5:41PM

    Govt makes its budgets on basis of forecasted revenues and expenditures. if crooks like you and your brothers in Panjab refuse to pay KPs dues in lieu of NHP, their account books are bound to get imbalancedRecommend

  • azmat
    Jan 18, 2016 - 5:43PM

    You mean they could predict that the center would defraud them. Recommend

  • azmat
    Jan 18, 2016 - 5:53PM

    raise taxes? what kind of dumb comment is that. All economists agree on the fact that Pakistan is already a very heavily taxed country and the cost of doing business is very high which is an impediment to foreign investment.The answer does not lie in increasing the tax rate or imposing additional taxes. The FBR which is under Federal govt is the tool for tax collection and it needs reforms to be able to correct direct taxes from the wealthy instead of indirect taxes that all pay at equal rate. Indirect taxation is sucking life out of the poor. Income can only be taxed by FBR. imposing additional provincial taxes would further complicte teh situation for poorRecommend

  • Bilal
    Jan 18, 2016 - 8:35PM

    Pathetic comments again.

    Yes PTI should tax people on account of Federal Gov’t not paying KPK’s due share on time !

    Pathetic again.

    KPK should only be criticized for not raising hue and cry about it asap.Recommend

  • Adnan Siddiqi
    Jan 19, 2016 - 3:34PM

    KPK first needs to compensate the center on account of massive theft of gas and electricity.Recommend

  • Adnan Siddiqi
    Jan 19, 2016 - 3:40PM

    His province he facing a “financial crunch” and yet the CM of KPK is taking a joyride to Scotland. How charming.Recommend

  • Abdullah
    Jan 20, 2016 - 11:13AM

    @azmat.bro your comments show that you have no idea of how 18th ammendment works.My comments were not meant to offend any one but no one should be so foolish that they will prepeare a budget considering to get the amount which has not been paid from years.Totally it was incompetency or illintentions.You will understand what i said if you prepeare a budget in an organisation.Let alone do it on the provincial level.Recommend

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