Hydroelectricity production in AJ&K and myths attributed to its royalty

On July 06, 2020, Pakistan and China signed an accord for the construction of Azad Pattan Hydel Power Project at Islamabad in presence of Prime Ministers of Pakistan and Azad State of Jammu & Kashmir. This project will cost $1.5 billion and it will add 700MW in the national grid on its completion. Few days before the signing of Azad Pattan Hydel project, a similar signing ceremony was organized for Kohala Hydel Power Project (1100 MW) with a humongous cost of $ 2.4 billion. Both these mega projects are expected to bridge the gap between supply and demand for energy in the country.

Both these mega-projects are to be constructed at locations that are the part of disputed territory of Jammu & Kashmir. Nationalist parties and groups, which have been raising their concerns for decades over the matter of royalty (net hydel profit or water usage charges) of Mangla Dam and later for the Neelum Jehlum Hydel Power Project, have voiced their concerns once again for the royalty of Kohala and Azad Pattan Power Projects. There is a general perception that prevails in AJK that the AJK government is not paid the due royalty by Pakistan for the projects which are although constructed in AJK but benefits are reaped by Pakistan. This perception grew stronger over time and some groups are found claiming trillions of rupees from government of Pakistan on account of the royalty of Mangla Dam and NJHPP. However, nobody ever made any well-searhced calculation in this regard and all these claims were made on hearsay and assumptions.

In view of the above, we assumed this responsibility and tried to make some estimations and calculations on the basis of publically available statistics regarding the power generation in AJK, Net Hydel Profit (NHP), or Water Usage Charges (WUC) which AJK government receives from the government of Pakistan annually. For the information of readers, it is pertinent to mention that under Article 161(2) of the constitution of Pakistan, provinces are eligible for the Net Hydel Profit (NHP) while other units of the federation, such as AJK & GB, shall be paid the due amount under Water Usage Charges. However, the AJK government interchangeably uses NHP and WUC in the budget presentations and official documents, which in this case shall be considered same. We would try to make it simple and easier for our readers to understand and comprehend the calculation.

1 – Rates of Net Hydel Profit (Royalty) in Pakistan

Council of Common Interests (CCI) of Pakistan has reached consensus in June 2017 on Rs1.10 per kWh as Net Hydel Profit (NHP). Wapda earlier has been paying Rs 0.58 per unit as NHP or royalty. The same rates are applicable to the power generation that takes place in Azad Jammu & Kashmir (AJK).

2 – Rates of Net Hydel Profit / Water Usage Charges in different countries

As per Hydropower Royalties: A Comparative Analysis of Major Producing Countries by Multidisciplinary Digital Publishing Institute (MDPI) published in April 2017, Pakistan pays one the highest per kWh (unit) rate in the world in terms of the Net Hydel Profits (NHP) or royalty to the provinces and federal territories. Below chart may be referred to for the comparison:

Since the comparison by MDPI has been made considering 1 USD = PKR 100, PKR has depreciated by more than 60% since April 2017. Therefore, we have prepared a revised chart for the readers by incorporating the impact of depreciation in the chart.

1 USD = PKR 165
1 CAD = PKR 125

3 – Total Energy Requirement of AJ&K

As per the official website of the Department of Planning and Development (P&D) AJK, the total estimated requirement of electricity in AJK is around 400 MW with per capita consumption of 403 KWh. However, AJK receives 330MW to 350MW out of its total production. Since this electricity is provided back to AJK entirely from the power generation of the Mangla Power Project, the Net Hydel Profit (NHP) is not applicable in this case and this consumption is excluded from the calculation of NHP or royalty claims of AJK.

4 – Explanation and conversion of units

MW=Megawatt
KW=Kilowatt
1 Megawatt (MW) = 1000 Kilowatts (KW)
1 MWh = 1000 kWh
1 electricity unit = 1kWh
Rate of Net Hydel Profit (NHP) or royalty = Rs 1.10 per unit

5 – Total power generation of Mangla Dam and NJHPP

Mangla Dam originally had an installed capacity of 1000MW. However, after the completion of Mangla Dam upraising project in 2009, an additional 150 MW capacity was added to the powerhouse which took the total generation capacity of the dam to 1150 MW.

For sake of simplicity in calculation, we assume that power house operates on the maximum capacity.

Total power generation of Mangla Dam per hour: 1150 MW
Per Hour electricity generation: 1150 X 1000 = 1,150,000 kWh (electricity units per hour)

6 – Total power generation of Neelum-Jhelum Hydropower Plant (NJHPP)

NJHPP started its operations which installed a capacity of 969 MW.

Total power generation of NJHPP per hour: 969 MW
Per Hour electricity united generation: 969 X 1000 = 969,000 kWh (electricity units per hour)

7 – Calculation of Net Hydel Profit

a) Mangla Dam:

As AJK receives 350 MW of electricity from Mangla Dam, therefore NHP or royalty is not applicable to this 350 MW. Hence, NHP is applicable to the remaining 800MW.

Electricity generation per hour (kWh) : 800MW X 1000 = 800,000 kWh (electricity units per hour)
Electricity generation per day (kWh): 800,000 X 24 = 19,200,000 kWh
Electricity generation per year (kWh) : 19,200,000 X 365 = 7,008,000,000 kWh

NHP (Royalty) earnings per hour: 800,000 X 1.10 = Rs 880,000 per hour
NHP (Royalty) earnings per day: 19,200,000 X 1.10 = Rs 21,120,000 per day
NHP (Royalty) earnings per year: 7,008,000,000 X 1.10 = Rs 7,708,000,000 per year

So Mangla Dam Power House, if operates on maximum capacity throughout the year, will generate 7.008 billion units of electricity thereby earning the Net Hydel Profit (royalty) of Rs 7.708 billion in a year. Halts in the operation/generation due to scheduled maintenance and other factors have not been taken into account.

b) Neelum Jhelum Hydro Power Plant (NJHPP)

(For maximum installed capacity of 969 MW)
Electricity generation per hour (kWh) : 969MW X 1000 = 969,000 kWh
Electricity generation per day (kWh): 969,000 X 24 = 23,256,000 kWh
Electricity generation per year (kWh) : 23,256,000 X 365 = 8,488,440,000 kWh

NHP (Royalty) earnings per hour: 969,000 kWh X Rs 1.10 = Rs 1,065,900 per hour
NHP (Royalty) earnings per day: 19,200,000 kWh X Rs 1.10 = Rs 25,581,600 per day
NHP (Royalty) earnings per year: 8,488,440,000 kWh X Rs 1.10 = Rs 9,337,284,000 per year

So NJHPP, if operates on maximum capacity throughout the year, will generate 8.488 billion units of electricity thereby earning the Net Hydel Profit (royalty) of Rs 9.337 billion in a year. Halts in the operation/generation due to scheduled maintenance and other factors have not been taken into account.

c) Combined Generation and NHP (royalty) of Mangla Dam and NJHP

Annual generation of Mangla dam: 7,008,000,000 kWh (electricity units)
Annual generation of NJHPP: 8,488,440,000 kWh (electricity units)
Annual total generation of Mangla Dam and NJHPP : 15,496,440,000 kWh (electricity units)

Annual total generation of Mangla Dam and NJHPP: 15,496,440,000 kWh (electricity units)
Annual NHP (royalty) of Mangla Dam (as calculated above): Rs 7,708,000,000 (Rs 7.708 billion)
Annual NHP (royalty) of NJHPP (as calculated above): Rs 9,337,284,000 (Rs 9.337 billion)

Combined Annual NHP (royalty) of Mangla Dam and NJHPP : Rs 17,046,084,000 (Rs 17.046 billion)

8 – Conclusion

Now if we look into the budget 2020-21 of AJK, we shall see, more or less, same amount (Rs 16.9 billion) which the Government of AJ&K has included in the budget receipts.

AJ&K Government has been generating similar amount during all these years by buying electricity at the subsidized rate of Rs. 2.59/kWh and charging customers at regular rates. This calculation/estimation should help in addressing the concerns of the people of AJK regarding their share of royalty for their resources which are in use of the federal government. It should also help in diffusing the propaganda by some quarters which are hell-bent on creating a sense of deprivation among the people of AJ&K. With the start of operations at Kohala Hydel Power Project, it is expected that AJK’s share of royalty, (which from now on will be paid directly with the recent decision by ECC) will further increase by around 30%. Azad Pattan Hydel Power Project, Karot Hydel Power Project, and Arja Hydel Project are also underway which are expected to commence their operations in the next 5-7 years. These projects will lead AJK towards self-sufficiency along with creating jobs and other livelihood opportunities for the people of AJK.

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