Disastrous Electricity Tariffs Renegotiate Capacity Charges & Put a Halt on Sales Tax

Karachi (PR): Mr. Irfan Iqbal Sheikh, President FPCCI, has said that Pakistani households and businesses are facing mounting power prices. NEPRA’s latest forecast for power purchase prices for the fiscal year 2023 – 24 reveals a substantial financial burden, with consumers to bear 68 percent of costs for fixed capacity payments; primarily benefiting coal plants.

Mr. Irfan Iqbal Sheikh Added that the substantial fuel costs – particularly petroleum imports –potentially pose extreme volatility and strain on foreign exchange reserves; with no clear solution or governmental strategy in sight. As a result, consumer-end tariff has been increased and applicable with effect from July 1, 2023.

FPCCI categorically and vociferously rejects the recent hike in electricity prices; because it is debilitating both for residential and commercial consumers; and, inflation already killing the businesses and rendering them unprofitable & bankrupt.

FPCCI Chief added that, currently, residential consumers are unable to pay their electricity bills across the country; and, on an average, residential and commercial consumers pay 15 – 20 percent extra in the form of uniform quarterly adjustment; fuel price adjustments and additional surcharges.

Additionally, residential consumers pay an extra 20 – 25 percent in the form of electricity duty, sales tax and income tax; and, residential consumers are subjected to pay Rs. 35.57 per kWh for off-peak load and Rs. 41.89 per kWh for peak load. It is important to note that these charges exclude taxes, fuel cost adjustments, uniform quarterly adjustments and additional surcharges.

Whereas, commercial consumers are also subject to further tax and extra tax in addition to electricity duty, sales tax and income tax. In current bills, commercial consumers are paying 37 – 40 percent of the total electricity charges in taxes and duties.

Mr. Irfan Iqbal Sheikh explained that a commercial consumer with electricity consumption of 5000 kWh is subject to pay a hefty Rs. 381,785 rupees in electricity bill. It is astonishing to note that around Rs. 135,994 rupees will go into the government pockets in the form of taxes and duties; not including additional surcharge and fuel cost adjustment.

Mr. Sheikh stressed that a better and more viable option should be explored to meet IMF’s requirement to curb circular debt and provide affordable electricity to consumers. The immediate solution to reduce the power tariff is to reduce the operational costs of all power distribution companies, i.e. withdraw the provision of free electricity to WAPDA employees; reduce transmission & distribution (T&D) losses and eliminate electricity theft.

FPCCI President proposed that the government needs to negotiate with power plants to increase the debt payment period to reduce the capacity component in the power tariff. We urge the government to halt the imposition of sales tax for 6 – 8 months in order to reduce cost of doing business.

Mr. Irfan Iqbal Sheikh maintained that businesses cannot survive with the provision of unaffordable electricity; economic growth will be jeopardized and many small & medium enterprises will shut down. Our profits are already marginalized as a reduction in sales due to record inflation in the country. The business community has always supported the government; but, at this juncture, we cannot continue to pay these hefty electricity bills, he added.