Centre, provinces fail to agree on mechanism for net hydel profit

Power minister argues AGN Kazi formula could not predict quantum of profit

ISLAMABAD: A dispute has erupted between federal and provincial governments over the mechanism for determining the net hydel profit and cost of electricity generation, transmission, distribution and line losses.

The Council of Common Interests (CCI) - an inter-provincial body - has constituted a committee to deliberate the issue. It comprises deputy chairman of the Planning Commission, secretary of water resources and chief secretaries of Khyber-Pakhtunkhwa (K-P) and Punjab.



In a meeting of the CCI held on April 24, K-P Chief Minister Pervez Khattak underlined the need for implementing the previous CCI decision on payment of net hydel profit to provinces.

He recalled that the CCI had referred the matter to the Inter-Provincial Coordination Committee (IPCC) for making appropriate recommendations. The IPCC then recommended that the AGN Kazi methodology should be adopted for calculating the net hydel profit.

According to Article 161(2) of the Constitution, the net hydel profit earned by the federal government on any undertaking established or administered by it from the bulk power generation at a hydroelectric power station will be paid to the province in which the generation facility is situated.



During the meeting, significant difference of opinion emerged between provinces and the federal government on the mechanism for determining the cost associated with electricity generation, transmission, line losses and the calculation of net hydel profit.

Prime Minister Shahid Khaqan Abbasi emphasised the importance of reconciling estimates of hydel profit payable to the provinces. The K-P government called for implementing the CCI decision on the AGN Kazi methodology. However, they agreed on the reconciliation of figures and rates of hydel profit.

Minister for Power Division Awais Ahmed Khan Leghari expressed reservations, saying the AGN Kazi formula could not predict the quantum of profits as electricity generation was a mix of thermal, coal and hydel resources.

The AGN Kazi committee was constituted on July 25, 1985, headed by then Planning Commission deputy chairman AGN Kazi. Its mandate was to devise a formula for determining the net hydel profit for the provinces.



Its report was finalised on July 28, 1987 and approved by the CCI on January 12, 1991. At that point, the Water and Power Development Authority (Wapda) had not been divided into separate water and power companies, which was done in 2007.

By that time, power generation was the exclusive domain of Wapda and tariff was determined by the Finance Division before the creation of National Electric Power Regulatory Authority.

The minister said Wapda was currently recovering only the cost of power generation with no profit whereas the federal government had to take care of loans acquired for Neelum-Jhelum and Dasu hydroelectric power projects.

After detailed discussions, the CCI called for adopting the AGN Kazi methodology for calculating the net hydel profit and constituted a committee to address the dispute over rates and calculation of profit.

Published in The Express Tribune, May 10^th, 2018.

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