NHP methodology, power projects' transfer: Wapda, provinces continue to have serious differences

Business Recorder

10-07-2025

ISLAMABAD: The Water and Power Development Authority (Wapda) and provincial governments continue to have serious differences regarding the methodology of Net Hydel Profit (NHP) and the transfer of power projects to respective provinces, sources in the Ministry of Planning, Development, and Special Initiatives told Business Recorder.
Sharing the details, sources said that a Technical Committee comprising representatives from Wapda and the provinces is holding discussions to evolve a consensus on a workable formula.
During the 5th meeting of the Committee held on January 10, 2025, it was agreed that members would furnish firmed-up proposals to be discussed in the next meeting. Based on input from stakeholders, a report will be submitted to the Council of Common Interests (CCI).
KP demands Re1/unit hike: NHP: centre-provinces row reignites
As per the decision, the provincial governments, Wapda, and Power Planning and Monitoring Company (PPMC)—representing the Power Division, Ministry of Energy— submitted written comments along with their proposals, which are as follows:
Govt of Khyber Pakhtunkhwa (GoKP): The provincial government emphasised to make the payments of NHP as per Kazi Committee Methodology (KCM), which was approved by the National Finance Commission (NFC) in 1988, Federal Cabinet in 1990, and the CCI in 1991, and its validity was further reinforced by the Supreme Court's 1997 judgment in the Gadoon Textile Case and being a constitutional right under Article 161 (2) of the Constitution.
The GoKP has proposed a second interim arrangement to settle the outstanding dues by increasing the electricity tariff by Rs.1/ kWh. Additionally, the federal government reiterated its earlier stance of transferring the hydro power stations to the respective provinces.
Regarding delay in NHP payments, the GoKP pointed out that Wapda is no longer a revenue collecting agency for the power sector, as CPPA-G is acting as a collecting agency of the federal government; therefore, the payment should be made by CPPA- G, under Power Division.
Govt of KP presented following three proposals: (i) payment of NHP by federal government as guaranteed under Article 161 (2) of the Constitution, Presidential Order No 3, decisions of CCI from 1993 to 2022 and subsequent calculations made by Jahanzeb Committee in the report approved by CCI December 23, 2019. Federal government may consider financing of power component of a hydro power station from PSDP on the analogy of Dam component.
Proposal ii: so that the revenues generated may be made available for NHP payments to the entitled provinces transfer the existing Hydro Power stations, currently owned by Wapda, to the respective provinces, as was previously proposed by GoPb. The Power Generation Policies of 1995 and 2015 otherwise allow transfer of power stations to the provinces.
Federal government may pay the outstanding NHP payments as per KCM to the provinces till the transfer of hydro power stations to the provinces. O&M can be retained by Wapda.
Proposal iii: Till the finalization options, the federal government may announce a 2nd interim arrangement of NHP payment by increasing consumer end tariff by Rs. 1/ KWh to generate the requisite funds.
Instead of Wapda, CPPA-G may directly pay NHP to the entitled provinces through ESCROW account.
By determining wheeling charges based on the rate of power wheeling from Pehru Hydropower Station, PEDO be facilitated to wheel up to 1,500 MW of power, facilitating its sale through electricity wheeling. Water Usage Charges may also be enhanced to Rs. 3/ kWh.
Government of Punjab: Government of Punjab mentioned that mandate of the Committee, constituted by CCI in its 41st meeting due to divergent viewpoints on KCM, was later changed through revised minutes by amending the original ToRs; i.e., 'determine an out of box solution/ methodology to determine net hydel profit' to 'propose an out of box solution for the payments of net hydel profit to entitled provinces. Therefore, Punjab maintains that without addressing the methodology issue for NHP calculation under Article 161 (2), NHP payments to the provinces cannot be resolved.
As per Article 161 (2) of Constitution, CCI is to determine the revenues from bulk power supply at hydro-electric stations. However, the KCM considers the average basket price, incorporating various energy sources & factors and only accounts for the electricity losses at the point of generation, neglecting additional losses incurred during transmission, distribution, and commercial operations. Therefore, KCM is non-implementable and violative of the Constitution.
Power generation mix has shifted significantly over time, with hydel's share decreasing from 60% to 23% and thermal power becoming the dominant source, accounting for 70% of total generation. Besides this, certain factors such as Energy Purchase Price (39% of tariff), Capacity Purchase Price (61% of tariff), Distribution & Supply margins, transmission charges, Market Operation Fee, and Prior Years adjustments, along with various types of taxes, contribute towards the tariff and average unit price of electricity, although these cannot be considered part of the revenue.
As per minutes of 41st & 49th CCI meeting, electricity tariff is expected to increase significantly, from Rs.4.50 to Rs.7.50, alongside a rising circular debt projected to reach Rs.7 trillion by 2030.
Copyright Business Recorder, 2025