Cash-strapped K-P govt amends law to borrow from itself

Efforts on to amend HDF Act to divert funds to other heads

PESHAWAR: The Khyber-Pakhtunkhwa (K-P) government on Wednesday issued an ordinance to amend the Hydel Development Fund (HDF) Act to allow it to reallocate money from the fund.

The cash-strapped K-P government is set to borrow Rs15 billion from the fund to finance budget items. It claims the money would be returned in the next fiscal year, said an official privy to the development.



Sources say that the K-P Energy and Power department has an estimated Rs30 billion in the fund.

However, Section-3(4) of law proscribes the government from using the fund for any apart other than hydel energy development.

“The amount contributed to the fund shall be exclusively utilised for the development of hydel electricity in the province,” Section-3(4) states.

To remove this barrier, the government issued an ordinance on March 7 to amend the aforementioned section as well as other sections in the law.

Under the ordinance, the government can utilise the funds for any other purpose subject to the approval of the HDF board.

The board is comprised of the chief minister, chief secretary, additional chief secretary, the finance minister and secretary, the energy minister and secretary, the Bank of Khyber managing director, and the Pakhtunkhwa Energy Development Organization managing director.

The nomenclature of the HDF has been revised to the Energy Development Fund.

The change means the K-P Energy and Power Department can also use the fund to develop other energy sources including solar and wind energy.

In April 2016, the provincial government furnished the very same ordinance, titled, “The K-P Energy Development Ordinance 2016.”

The regime had to borrow Rs15 billion from the fund in order to support the weak financial health of the province.

“Last year, the finance department returned the amount in time and we expect them to return it again after completing its requirements,” said a senior official dealing with the matter.

In February 2017, the summary to promulgate the ordinance was moved and the government pushed to amend the law via an ordinance.

Although it was in session at that time, the matter was not raised in the K-P Assembly.

“The aim was to do the job silently and quickly. The opposition members would have caused an uproar in the assembly if the amendments were sent in the form of a legislative bill,” the official added while explicating the motive behind the issuance of an ordinance.
Efforts to raise funds

The regime has desperately been endeavouring to arrange the amount within its means to meet its expenditures in the current fiscal year.

It has tried to borrow Rs17 billion from the pension and general provident fund.

Nevertheless, the deal could not materialise due to the board members of these funds demanding high-interest rates from the government.

Similarly, K-P government tried to get the money from the World Bank, but once again that effort was also unsuccessful, said a senior official in the finance department.

Dismal financial performance

Conversely, the government is struggling to meet its revenue targets for the current year.

Fiscal operations details issued by the federal finance ministry show that the K-P government has only received Rs7.04 billion in provincial tax receipts, while Rs17.4 billion has been received in non-tax receipts in the first six months of this fiscal year.



The non-tax receipts include Rs13.8 billion of the hydroelectricity profit transfers from the federal government.

The K-P government’s 'own' non-tax receipts are only Rs3.6 billion.

The provincial government had set a target for tax receipts at Rs18.17 billion and Rs31.3 billion for non-tax receipts.

Both figures now seem highly optimistic.