If you want to see what an economic contradiction looks like, drive from Mangla to Muzaffarabad. Below you sits one of Pakistan's largest reservoirs. Around you is the Neelum-Jhelum project. Downstream and upstream are Kohala, Karot, Azad Pattan, Patrind, Bong, Gulpur — a cluster of hydropower plants whose combined installed capacity dwarfs AJK's own peak demand of about 350 megawatts. And yet inside the homes on either side of the road, families are paying electricity bills anchored to Pakistan's national retail tariff of roughly Rs 18 per unit, plus surcharges.
For decades, this asymmetry sat in the background of AJK politics. What changed after 2022 was the pricing regime and the political willingness to talk about it.
The Mangla arrangement
For most of the plant's history, AJK received only 15 paisa per unit as "water-use charges" from Mangla — an arrangement rooted in the original Mangla Dam agreement, later modified during the Mangla Raising Project of 2003. Meanwhile, Khyber Pakhtunkhwa and Punjab received Rs 1.10 per unit as "net hydel profit" (NHP) from Tarbela and Ghazi Barotha. The gap was defended on the constitutional argument that AJK is not a province and therefore not entitled to NHP. In February 2022, a fresh MoU signed at Kashmir House in Islamabad brought AJK's water-use charge on par with provincial NHP at Rs 1.10 per unit, expected to yield around Rs 12 billion in additional annual revenue. NEPRA formalised the change in 2023, extending it to Neelum-Jhelum and future public-sector projects. AJK's take from FY23 rose to Rs 5.44 billion, up from Rs 712 million the previous year.
That should have solved the problem. It did not.
Why the parity did not settle things
The revised charge helps the AJK government's balance sheet, but it does very little for the household paying a bill in Kotli. NEPRA-determined retail tariffs are set nationally, and AJK's distribution structure ultimately routes through Central Power Purchasing Agency (CPPA) settlements. AJK residents effectively receive electricity at retail rates while their region hosts the generation. JAAC's demand — anchored in point after point of its 38-point charter — is that tariffs in AJK be set on the basis of local generation cost, not national average. In hydropower terms, that would translate to a bulk tariff in the range of Rs 2–4 per unit rather than the double-digit rates households currently face.
The CPEC layer
The stakes are compounding. Two flagship China–Pakistan Economic Corridor projects — the 1,200 MW Kohala plant and the 700 MW Karot plant — bring around 2,000 MW of new generation into AJK. Under prevailing formulas, water-use charges will accrue to the AJK government at NHP-linked rates, but consumer tariffs will remain nationally set. Every additional megawatt sharpens the political question: if the water is ours and the generation happens here, on what principle do we buy it back at Karachi prices?
Arrears and enforcement
Layered on top is a payment-default culture. The AJK electricity department was owed more than Rs 4 billion by consumers in early 2024, kept from doubling only because tariffs had been frozen at October 2022 levels — itself a political concession. Any move to enforce arrears without addressing structural pricing risks triggering a fresh wave of protest.
Wheat, roti and the psychology of subsidy
Electricity is only half the story. Gilgit-Baltistan receives subsidised wheat under a longstanding arrangement — a bag that costs an AJK household considerably more than the same bag in Gilgit or Skardu, even though both regions sit under similar constitutional grey zones. JAAC turned this comparison into a political weapon. If Gilgit-Baltistan gets subsidised wheat, why not Azad Kashmir? Successive Pakistani governments have found no clean answer.
The economic argument at the centre of AJK's crisis is not that Pakistan has ignored AJK. It is that the accounting has been done at the wrong level — at the level of the government-to-government transfer, not the household. Until the family in Rawalakot sees the cost of the hydropower it lives next to reflected in the bill it pays, the protests will keep returning.
Yasir Rai