Khyber Pakhtunkhwa Claims Unequal Hydel Profit Distribution, alleges Federal Bias
August 16, 2025 – Khyber Pakhtunkhwa (KP), a major contributor to Pakistan’s hydropower generation, received considerably less revenue from net hydel profits (NHP) last fiscal year compared to Punjab, sparking accusations of federal bias and discrimination.
New data reveals that KP garnered approximately Rs33 billion in profits from hydroelectricity generation during the past fiscal year. This figure stands in stark contrast to the Rs65.8 billion allocated to Punjab for the same period, as indicated by finance ministry records. The distribution of these profits, governed by Article 161(2) of the Constitution, has become a contentious issue, with KP officials asserting that the province, despite generating the majority of the nation’s hydel power, is not receiving its due share.
NHP Disparities Fuel Provincial Grievances
Muzzamil Aslam, Adviser to the Chief Minister on Finance for KP, highlighted the disparity, stating that Punjab received more than double the NHP compared to KP. He pointed to this as clear evidence of “bias and prejudice” from the federal government and the Water and Power Growth authority (Wapda) towards the Pakistan Tehreek-e-Insaf (PTI)-led province.
KP’s budget documents forecast ample NHP revenues, projecting Rs111.3 billion in 2024, later revised to Rs113 billion. For the current fiscal year, the projected NHP profits stand at Rs105.9 billion. The perceived underpayment has led KP’s government to question the federal government’s commitment to equitable resource distribution.
The issue of NHP payments is long-standing, marked by competing claims and unresolved disputes between the federal government and KP. A meeting scheduled for August 5 to address the matter was postponed, which KP officials derided as a “delaying tactic” aimed at frustrating the provincial management and its populace.
A History of Unresolved NHP Disputes
The current NHP controversy is rooted in historical agreements and differing interpretations. In 2016, a Memorandum of Understanding (MoU) was signed between the federal and KP governments to settle various pending issues, including the “uncapping” of NHP, arrears, and water and gas-related matters. This agreement stipulated payments of Rs70 billion in four installments for arrears and aimed to increase KP’s NHP share from Rs6 billion to over Rs18 billion, with a 5% annual increase.
Though, the KP government contends that the federal government failed to adhere to the agreed-upon 5% annual indexation for the uncapped NHP. This alleged non-compliance has resulted in the accumulation of “un-reconciled arrears,” which KP estimated at over Rs41 billion in the last fiscal year and Rs45.21 billion in the current fiscal year.
| Province | NHP Received (Approx.) |
|---|---|
| Khyber Pakhtunkhwa (KP) | Rs33 Billion |
| Punjab | Rs65.8 Billion |
Stalemate in NHP Reconciliation Efforts
The dispute escalated in 2018 when the KP government brought the issue of implementing the kazi Committee Methodology (KCM) to the Council of Common Interests (CCI). The CCI formed a committee to purposeful on NHP determination, which has convened multiple times without reaching a consensus on the mechanism to pay an estimated Rs1.5 trillion NHP to KP under the KCM for the period spanning 2016-17 to 2022-23.
KP’s proposals include NHP payments aligned with constitutional provisions, presidential orders, CCI decisions dating back to 1991, and specific committee reports. The province also suggests that the federal government should fund Wapda’s powerhouse development projects through the public Sector development Program rather than Wapda’s generation tariff revenues. This, they argue, would free up funds essential for NHP payments to entitled provinces.
Further, KP has proposed the transfer of hydropower projects to the province, mirroring earlier power generation policies. Under this proposal, outstanding NHP payments, calculated as per KCM, would be made by the federal government up to the date of project transfer, with Wapda retaining operation and maintenance responsibilities.
Did You Know? Khyber Pakhtunkhwa is frequently enough referred to as the “powerhouse” of Pakistan due to its critically important contribution to the country’s hydroelectric power generation.
Pro Tip: Understanding provincial revenue distribution mechanisms is crucial for appreciating inter-provincial economic dynamics and fiscal federalism in pakistan.
Key NHP Dispute Points
Here’s a snapshot of the core issues surrounding Net Hydel Profit distribution:
- Discrepancy in Payments: KP claims significantly lower NHP receipts compared to Punjab, despite higher power generation.
- Accordance with Constitution: The dispute centers on the interpretation and application of Article 161(2) concerning NHP distribution.
- Historical Agreements: Memoranda of Understanding and earlier CCI decisions are cited, with differing views on their implementation.
- Kazi Committee Methodology (KCM): A proposed framework for NHP calculation and payment remains a point of contention.
- Un-reconciled Arrears: Significant amounts of NHP are claimed by KP as pending or disputed dues.
the Enduring Importance of Hydel Profit Distribution
The ongoing NHP dispute between Khyber Pakhtunkhwa and the federal government underscores a critical aspect of fiscal federalism in Pakistan. the equitable distribution of revenues generated from natural resources,notably hydropower,is vital for provincial development and national cohesion. Such revenue-sharing mechanisms are designed to ensure that regions contributing significantly to national resources benefit directly from their generation. This principle is not unique to Pakistan; many federations grapple with ensuring fair returns from resource-rich provinces. The long-standing nature of the NHP issue highlights the complexities in resource management, inter-provincial cooperation, and the interpretation of constitutional mandates. Moving forward, transparent and consistently applied methodologies for NHP calculation and distribution are essential to foster trust and lasting economic growth across all federating units.
Frequently Asked Questions About NHP
- what is Net hydel Profit (NHP)?
- Net Hydel Profit (NHP) refers to the revenue generated from the production of hydroelectricity, which, according to Pakistan’s Constitution, is payable to provinces where power generation facilities are located.
- Why is Khyber Pakhtunkhwa disputing NHP payments?
- Khyber Pakhtunkhwa alleges that it receives a disproportionately lower share of NHP compared to other provinces like Punjab, despite being a major hydropower producer, citing federal bias.
- What is the Kazi Committee Methodology (KCM) in relation to NHP?
- The Kazi Committee Methodology (KCM) is a proposed framework for determining and distributing Net Hydel Profits, which KP advocates for full implementation.
- What constitutional article governs NHP distribution in Pakistan?
- Article 161(2) of the Constitution of pakistan outlines the provisions for the distribution of revenue from the generation of power, including NHP.
- What action has KP taken to resolve the NHP issue?
- KP has engaged with the federal government through various meetings and brought the issue to the Council of Common Interests (CCI), advocating for its proposals for NHP calculation and payment.
