CCI constitutes body to work out NHP solution

The Council of Common Interests (CCI) has constituted a committee comprising financial and technical experts to determine out of box solution for Net Hydel Profit (NHP) as at the present level of NHP's calculation circular debt will touch Rs 7 trillion by 2023, official sources told Business Recorder.

Sharing the background, the sources said, Secretary Ministry of IPC / CCI informed the meeting on December 23, 2019 that pursuant to the CCI decision dated 24-09-2018 on the subject matter, the Main Committee headed by Deputy Chairman, Planning Commission (DCPC) in its first meeting constituted a Technical Sub Committee (TSC) headed by Secretary, Power Division, to deliberate upon the issue of determination of rates/net profits in the light of decision of CCI. The TSC submitted its report to Main Committee for further deliberations. Main Committee deliberated on the report of TSC. Last meeting was held on Dec 19, 2019 and report of the Committee is to be presented by DCPC.

The DCPC gave a comprehensive presentation on the report of the Committee setup by CCI. He revealed that the Committee held eight meetings and deliberated in detail on the findings of Technical Sub-Committee. He briefly stated history of payment/calculation of NHP from 1978 to 2017 and pointed out that the MoU signed by Punjab and Khyber Pakhtunkhwa (KP) with Federal Govt. was the full & final settlement up to 2016 eroding all previous disputes and claims, through a non KCM methodology. The CCI declared ·NHP payments @ Rs.1.10/unit for present and onward calculations. However, on the objection of Govt. of KP, the CCI subsequently in 2017 deleted the word "onward" from its 2016 decision. Moreover, NEPRA allowed NHP @ Rs. 1.16/unit in WAPDA tariff as a pass-through item with 50 percent annual indexation. The DCPC also underscored the views of Power Division, Water Resources Division, Governments of the Punjab and KP, and on the basis of difference of opinions presented his findings as follows: (i) constitutional provision [Article 161(2)] is unambiguous and requires that 'the net profit earned by Federal Government shall be paid to the Province in which a hydro-electric station is situated; (ii) NHP emanates from "a" hydro electric station. It is not linked with the profit/losses of other power generation stations established by any undertaking established or administered by the Federal Government; (iii) several decisions, spanning over almost three decades by Constitutional Forums such as NFC, Federal Cabinet, 'CCI and Supreme Court of Pakistan regarding NHP are settled and cannot be re-opened; (iv) Article 154(7) of the Constitution provides the remedy of Joint Session of the Parliament in case any party is dissatisfied with decision of CCI; (v) KCM works backwards from the consumer price and is thus tariff neutral; (vi) Technical Sub-Committee has confirmed that GoKP and GoPb have calculated NHP as per KCM; and (vii) CPPA-G (instead of WAPDA) is now the revenue collecting agency for the power sector.

The DCPC recommended that Federal Government (the Guarantor under President's Order No. 3 of 1991) should ensure payment of NHP, as worked out by GoPb and GoKP and confirmed by Technical Sub-Committee as being in conformity with KCM, to the entitled provinces.

The Secretary, Power Division stated that constitutionally payment of NHP to provinces is their right. However, KCM is not implementable. Moreover, the CCI has also endorsed non KCM methodologies over the years. KCM can be detrimental to national interest. NEPRA has the mandate to determine generation tariff at Bus Bar of every hydel station. NHP is now also applicable to AJK.

Full and final settlement of all previous liabilities between the Federal Government, KP and the Punjab has already taken place in 2016, and the CCI endorsed this dispensation to overtake all its previous decisions. Currently NHP is being paid at the same rate as agreed at the time of MoU of 2016.

Minister for Water Resources mentioned that KCM was a 35 year old formula. WAPDA is not earning any profit. Hence, KCM is no longer practicable due to changed ground realities. Moreover, KCM based NHP would increase tariff or it will be passed on to the consumers as WAPDA has no other source to make NHP payments except through electricity tariff.

The Chief Minister KP expressed disagreement to the view point' of Minister for Water Resources and Secretary, Power Division. He endorsed the recommendations of the KCM Committee. The Adviser to CM KP on Energy referred to past decisions of CCI and stated that CCI in 2017 re-iterated its earlier decision on KCM. He argued that NHP is being diverted towards payments to expensive Thermal Power Plants to subsidize over all tariff. Implementation of KCM for calculation of NHP is a constitutional and legal obligation of all parties.