great presentation

1. 1

2. Payment of Water Use Charges/Net Hydel Profit
to AJ&K
2

3. • A briefing regarding Financial Analysis of Sale/Purchase of Electricity
viz-a-viz Payment of Water Use Charges/Net Hydel Profit to AJ&K was
made to the Cabinet on August 24, 2017.
• Brief outline was follows:
i. Payment of Net Hydel Proceeds (i.e. Water Use Charges/ Net Hydel
Profit/Royalty) @ Rs.1.10/KWh to AJ&K on account of MHP & NJHPP
at par with provinces on the basis of equity and justice
ii. Determination of power purchase tariff as recommended by High Power
Committee constituted under clause 5.2(b) of Mangla Dam Raising
Agreement 2003
iii. Signing of Power Purchase Agreement for 30.4 MW Jagran-I hydel
power project
iv. On the basis of Arbitration Award 2006 claim of NHP/WUC against
Mangla HPP since 1990 would almost be Rs. 356.068 billion *
Background
* Source PDO
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4. Decision of the Cabinet
• On the basis of analysis it was recommended that
• “The GoAJ&K may ask the GoP for the same treatment as is given
to Provinces/ DISCOS in term of :
• Sharing of benefits form Hydel Proceeds
• Sale & Purchase of Electricity”
4

5. Relevant Clauses of Mangla Dam Raising Agreement 2003
“Clause 5.2 (a)”
(a) “ At Present the Government of Pakistan has fixed the rate at Rs.4.20/KWh for
the AJ&K. The WAPDA shall bear Rs.0.71 on the basis of 17% losses. The
Government (AJ&K) shall pay Rs.2.44 and the Ministry (W&P) shall pick up
Rs.1.05 as subsidy. In case of budgetary constraints of the Government, the
Ministry shall pick up the additional liability of Rs.0.12. This rate shall be deemed
to have become effective from September 2002 and shall be frozen till September
2003”.
“Clause 5.2 (b)”
(b) “ The future power tariff (beyond September 2003) for Azad Jammu & Kashmir
shall be fixed by Govt. of Pakistan on recommendation of a Standing Sub-
Committee already notified by Ministry of KANA & SAFRON vide notification No.
F.3/10/92-F&B dated 6th June, 2003. Copy of which is appended with this
agreement”.
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6. Relevant Clauses of Mangla Dam Raising Agreement 2003
“Clause 5.4”
“The responsibility of distribution of electricity may be withdrawn from
Government (AJK) and assigned to the AJ&K Council or any other relevant
organization. A study in this respect will be made by the Ministry KANA and
SAFRON/AJK Council and the Government”
“Clause 5.6”
The Government will get net hydel profit/water usage charges (royalty) from the
Mangla Dam with effect from the entry into force of this Agreement @ Rs.
0.15/KWh as per the policy laid down.
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7. Deliberations
Accordingly, as per clause 5.2 (b) of Mangla Dam Raising Agreement 2003
power tariff for AJK was decided on the basis of following guidelines issued in
the meeting of Sub-Committee held on 11-09-2003:
i. The power tariff for AJ&K from 1st Oct 2003 shall be Rs. 2.59 per unit.
The basis of the decision was that WAPDA charges Rs. 2.58 per unit for
domestic consumers upto 100 units. The AJ&K Government agreed to
reduce losses from 37.5%* to 27%. Accordingly, the rate per unit should
be Rs. 2.60. The committee agreed to take the average of these two rates
at Rs. 2.59 per unit
ii. Since the AJ&K Government don't have provision in their current year’s
budget to pick up additional liability of Rs.0.27 per unit, the sub-
committee recommended that the finances required in this regard would
be provided by the Federal Government
iii. The reduction in losses will be reviewed on monthly basis and any
financial gains from reduced losses would be adjusted to reduce the
Government subsidy
* Current Losses 38.71% Condt…
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8. Deliberations
• On December 08, 2015 the standing sub-committee recommended
revised tariff for AJ&K @ Rs. 5.79 per unit which is applicable rate of
1-100 units slab domestic category with the Analysis that majority of
electricity consumption in AJ&K falls in lower bracket of domestic
category in the schedule of electricity tariff.
(The same could not be actualized yet due to delay in final approval by the
respective fora of GoP as well as reservations of Finance Division GoP)
• Losses reported against purchase and sale of electricity for the last 18
years are almost 39%
• Outstanding liabilities against electricity charges claimed by WAPDA
are almost Rs. 80.739 billion
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9. Sale of Electricity From Jagran-1 HPP
• Power Purchase Agreement (PPA) of Jagran-1 HPP not being
signed on the pretext of GoAJ&K being defaulter and beneficiary
of low tariff
• Annual loss of approximately Rs. 700 million due to non signing
of PPA
• Due to delay in signing of PPA of 30.4 MW Jagran-I HPP
outstanding amount on account of energy charges since Aug. 2010
is Rs. 3.778 billion
Deliberations
9

10. Basis of Deliberations/Discussion
• In line with the decision of CCI, KP and Punjab provinces are being
paid NHP @ Rs.1.10/KWh
• According to clause 5.6 of Mangla Dam Raising Agreement 2003, Net
Hydel Profit/Water Usage Charges (Royalty) (NHP/WUC) is being paid
to GoAJ&K @ Rs. 0.15/KWh
• “Clause 5.6 of Mangla Dam Raising Agreement”
The Government will get net hydel profit/water usage charges
(royalty) from the Mangla Dam with effect from the entry into force of this
Agreement @ Rs. 0.15/KWh as per the policy laid down.
• The stance of AJ&K is for treatment of AJ&K at par with provinces in
accordance with the administrative arrangements issued by the Cabinet
Division on June 24, 1970 and May 11, 1971.
10

11. Current Power Supply System in AJ&K
• AJK Electricity Department (AJKED) purchases major portion of
energy from DISCOs (97%) and a small quantity from AJK Power
Development Organization(AJKPDO) (3%).
• DISCOs supply power at 132 /33/11 kV grid stations and AJKED has
built its own 11/ 0.4 kV Power Distribution Network to deliver energy
to end consumer.
• AJKED applies the same consumer tariff in AJ&K as being used by
IESCO (DISCOs).
• AJKED pays to DISCOs on Special Power Supply Tariff fixed
according to Mangla Dam Raising Agreement signed in 2003 (revision
proposed in 2015).
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12. Budgetary Status for Annual Receipts from WUC
HPP Project
Agreed
@ 0.15/KWh /
@ 0.425/KWh
Proposed
@1.10/KWh
Net
Enhancement
Mangla HPP
(5992 M. Units)
898.800 6591.200 5692.400
NJHPP
(5150 M. Units)
2188.750 5665.000 3476.250
Total 3087.550 12256.200 9168.650
Rs. in million
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13. Analysis of Purchase and Sale of Electricity
Scenario
at
Tariff
Rate/
KWh
Purchase
Price
(1590.121
MKWH)
Admin
Exp.
Total Exp.
Income from
Sale of Ele.
(998.684
MKWH)
Net Income
Loss
2.59 4118.413 2445.187 6563.600 8628.771 2065.171
(4510.358)
5.79 9206.801 2445.187 11651.988 8628.771
-3023.22
(-578.033)
8.25 13118.498 2445.187 15563.685 8628.771
-6934.91
(-4489.723)
Rs. in million
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14. Financial Impact Analysis
Scenario at
Tariff Rate/
KWh
Net
Income/
Loss
Agreed Net Income from
WUC @0.15/KWh/
@0.425/KWh
(MHP and NJHPP)
Projected Net
Income from
WUC
@1.10/KWh
Net Benefit
2.59 2065.171 3087.550 -- 5152.721*
5.79 -3023.22 3087.550 -- 57.330
5.79 -3023.22 12256.200 9232.980
8.25 -6934.91 -- 12256.200 5321.290
Rs. in million
*Including outstanding claims from 2003 to 2017 payable to DISCOs for Rs.80.739
billion on account of unsettled subsidy pending by FD-GoP and WAPDA
14

15. • Accordingly, series of meetings of the committee constituted by the Prime
Minister Office Islamabad comprising of Secretary, Finance GoP as
convener Secretary Ministry of Water & Power and Chief Secretary
GoAJ&K as its members were convened and discussions were made to
arrive upon consensus for resolution of the matter.
• In the meeting held on October 28, 2017, the committee assigned the
responsibilities to a sub-committee for detailed deliberation. The meeting
of technical Sub-committee was held on November 03, 2017 and
following proposal was given by FD-GoP.
Current Status
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16. WUC on Neelum Jhelum HPP
i. The Govt of AJK is of the view that Power Policy 2015 envisages WUC
@ 0.425/kwh for private sector projects only and does not cover public
sector projects. Therefore, AJK has requested that WUC for NJHPP
being a public sector project may also be considered at par with NHP
rate being paid on account of Terbela HPP and Ghazi Barotha HPP i.e
Rs. 1.10/kwh.
ii. Considering views of WAPDA, NEPRA and Law & Justice Division, the
WUC rate for HPP is proposed to be considered at par with other HPP
projects, subject to approval of the competent forum.
Proposal of FD-GoP
16

17. Proposal of FD-GoP
i. WUC @1.10/KWh for MHP may be determined for AJ&K at par with
provinces subject to the approval of CCI.
ii. Clause 5.4 of Mangla Raising Agreement, 2003 provides that
“the responsibility of distribution of electricity may be withdrawn from
Government (AJK) and assigned to the AJ&K Council or any other
relevant organization.”
Thus Electricity Department of AJK may be declared as DISCO and
NEPRA may be allowed to determine tariff for Electricity supply to
AJ&K, consistent with other DISCOs.
WUC on MHP and Determination of Tariff Rate
17

18. iii. Electricity supply to AJ&K may be charged at respective DISCOs
rates prospectively as determined by NEPRA and GoP notified rates,
w.e.f the date of approval of the competent forum instead of
Rs.2.59/kwh on provisional basis till Electricity Department of AJK
has been given a status of DISCO like EXWAPDA distribution
companies as operational in four provinces of Pakistan. This will
eliminate DISCOs Receivables towards AJK, which is being picked-
up by the GoP.
iv. Subject to approval of above proposal, the GoP will continue to
provide TDS support to Electricity Department of AJK as is being
provided to XWAPDA DISCOs.
Proposal of FD-GoP
18

19. Way Forward
19

20. Presentation by Electricity Department
20

21. POWER BILLING & COLLECTION AS PER GoP
NOTIFIED TARIFF AND SUPPORT TO AJ&K
(2003 TO 2017)
(Rs. in million)
Name of
DISCOs
Opening
Balance
Units
Billed
(M/kwh)
Average
Notified
Rate
/kwh
Billing
AJK
Rate
/kwh
Collection
from AJK
Subsidy by
(GoP &
WAPDA)
GEPCO 59 2,431 6.45 15,682 2.59 6,297 9,444
IESCO 433 15,713 6.05 95,036 2.59 40,698 54,771
PESCO 103 3,869 6.83 26,440 2.59 10,022 16,521
Total 22,014 137,158 57,017 80,736
Back
Source: Finance Division, GoP
21

22. TDS VIDE NEPRA DETERMINED AND GOP
NOTIFIED TARIFF PAID BY MoF
PERIOD Rs. in Million
Feb, 07 to June,10 11,638.751
Jul, 10 to June, 11 * 4,403.644
Jul,11 to June,15 18,332.36
Total 34,374.75
Adjustment Jul'15
to June, 17
(3,827.605)
Net TDS Paid by GoP 30,547.15
* Paid by M/o W&P as the budget was allocated to them
Back
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23. Composition of sub committee
Dated 06-june-2003
1) Secretary, Water and Power Chairman
2) Chairman, WAPDA Member
3) Chief Secretary, AJ&K Government Member
4) Joint Secretary (PF) Finance Division Member
5) Joint Secretary, KANA & SAFRON Member
TORs:
• Consumption pattern of AJ&K
• Acceptable line losses in AJ&K
• Mangla Dam Agreement of 1967
• Any other relevant point.
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23

24. 24
Annual Revenue from 30.4 MW Jagran-I HPP
Sr. Year
Annual
Generation
(MKWh)
Tariff as per indexation
based on WPI Rs./KWh
Annual Revenue
(Rs in million)
1 2000-01 61.992 1.700 105.386
2 2001-02 110.159 1.700 187.270
3 2002-03 97.22 1.700 165.274
4 2003-04 107.008 1.700 181.914
5 2004-05 83.059 1.700 141.200
6 2005-06 103.607 1.815 188.026
7 2006-07 96.386 1.998 192.589
8 2007-08 130.812 2.137 279.545
9 2008-09 126.605 2.487 314.917
10 2009-10 143.563 2.939 422.018
11 2010-11 18.469 3.958 73.100
12 2011-12 90.601 4.545 411.782
13 2012-13 137.004 5.252 719.545
14 2013-14 126.101 5.344 673.884
15 2014-15 117.576 6.030 708.982
16 2015-16 700.000
Total 5465.433
Payment 1587.383
Balance 3778.050 Back