Hydel profits: Centre to pay K-P Rs70b to settle arrears

Ministry of water, power to immediately notify uncapped NHP rates

ISLAMABAD:

Three months after the top power regulator approved fresh hydel power supply tariffs, the Khyber-Pakhtunkhwa government and the centre reached an understanding on thorny financial issues which will pave the way for the province to receive Rs70 billion in profits for its hydel electricity.

The understanding was reached during a meeting between K-P Chief Minister Pervaiz Khattak and federal ministers for finance and water and power – Ishaq Dar and Khwaja Asif, respectively – in Islamabad on Thursday.

According to separate handouts from the finance ministry and the K-P government, the biggest breakthrough was on settling the 15-year issue of uncapping net hydel profit (NHP).

They decided that rates determined by the National Electric Power Regulatory Authority (Nepra) for uncapped NHP will be notified immediately by the water and power ministry, a key condition for implementing the new tariff.

On November 13, 2015, Nepra had decided to provisionally uncap the NHP at a rate of Rs1.10 per kilowatt hour with a five per cent annual indexation for Water and Power Development Authority (Wapda) hydel power stations in K-P. This uncapping will see Wapda’s payments to K-P rise to Rs18.704 billion per annum from the current ad hoc rate of Rs6 billion which had been set under the Kazi Committee formula in 1991.

Accordingly, Islamabad and Peshawar signed a memorandum of understanding on Thursday as they agreed on a sum of Rs70 billion as the full and final settlement on past arrears of uncapped NHP after reconciliation of mutual claims in the power sector between the two governments.

The meeting also decided that Wapda, after seeking concurrence of Council of Common Interests (CCI) would file a tariff petition to recover Rs70 billion from electricity consumers in four instalments. The schedule set for the first instalment at Rs25 billion in the current financial year and Rs15 billion in each of the subsequent financial years.

The finance ministry has squarely placed the burden of payment on the consumers instead of paying arrears from the budget.

The meeting also discussed matters regarding Pehur Hydro Power Project owned by the K-P government. It was agreed that a Power Purchase Agreement (PPA) would be signed by the Central Power Purchasing Agency –Guaranteed (CPPA-G) by the end of March and a mechanism would be devised for recovering arrears.

The federal government also agreed to allocate 100 MMCFD gas to the K-P government to help generate power either on its own or through partnership with the private sector.

Both sides also made some progress on the construction of the Chashma Right Bank Uplift Canal project in K-P, but not before the project’s financing terms were changed. After a fresh feasibility study, the project will now be co-financed by the two governments with a 65-35 ratio, unlike previously when the federal government was supposed to fully fund the project. Further, the K-P government would bear operation, management and recurring costs of the project.

The Chashma project, which would provide 1.187 million acre feet of water for perennial irrigation of 286,140 acres of land in the southern districts of K-P, has pending approval since 2004.

As much as 0.72 MAF of water will be available out of the unutilised share of the province, while the remaining 0.467 MAF would have to be provided out of K-P’s 14% share from flood flows under the 1991 Water Accord. As a result, southern districts of the province will receive 0.61 MAF water in the Kharif season and 0.57 MAF in Rabi season.

It was also decided that the federal secretary of Human Resources Division would duly address the issues of Workers Welfare Fund (WWF) relating to K-P.


Published in The Express Tribune, February 26^th, 2016.