Relief for consumers as govt decides to end provincial electricity duty

ISLAMABAD: There is some good news for people amid the prevailing purchasing power crisis, as they won’t have to pay provincial electricity duty through their monthly bills.

In this connection, the Centre has informed the provinces that the power distribution companies will not collect the abovementioned duty with effect from next month, which also marks the start of the new fiscal year.

Through a letter, Energy Minister Awais Leghari has told the provincial governments about the move, saying the government wants to reduce the burden of taxes to achieve the goal of slashing the electricity prices.

Read more: Govt cuts LPG prices by Rs7.43 per kg

MEAGRE RELIEF BUT RIGHT DIRECTION

His remarks portray the fact that the people find every month that the total bill amount is more than the original electricity prices.

The government decision, meanwhile, is the first step in the right direction despite the meagre relief for the people, given that the maximum electricity duty rate of 1.5 per cent on the electricity consumed. One can now hope that similar steps would be taken in the case of other taxes and duties.

Earlier, the government announced that the electricity consumers would not have to pay Rs30 every month as the PTV fee.

ELECTRICITY COST ONLY

The letter highlights the steps government is taking to reduce the electricity prices. It includes reviewing the agreements with the independent power plants (IPPs) as well as slashing the rate of return for state-run power generations units, commonly known as GENCOS.

To explain the decision to end the provincial electricity duty, the minister described the stated government goal: the electricity bills should only reflect the original cost of electricity [generation].

The consumers should only pay the electricity price, he said, adding that the government aimed at all the additional charges.

As far as the revenue generation for the federating units is concerned, the minister asked the provinces to suggested alternatives to collect the electricity duty.

WHAT IS ELECTRICITY DUTY

Among a “long list” of taxes and duties paid by electricity consumers in Pakistan, the electricity duty is collected as a provincial tax.

In short, the electricity duty is a provincial tax levied under Section 13 of the West Pakistan Finance Act 1964 read with Article 157 (2)(b) of the Constitution.

For domestic and commercial consumers, the rate is 1.5 per cent. It is 1 per cent when it comes to industries and agriculture usage – tubewells and machinery.  

Meanwhile, there is another category: consumption from self-generation. The amount collected under this head is three paisa per unit [kilowatt-hour] of energy consumed/generated.

PURCHASING POWER CRISIS

People – especially the low-income groups and middle classes – are badly affected by the purchasing power crisis. The prices are increasing but there is no improvement in their incomes.

The net result is spending solely focused on meeting the basic needs: food, energy, education and others.

Meanwhile, the ground situation has reached a point where many households from low-income groups are hesitating using even fans in the extreme heat.    

It is worth noting that although inflation rate is down from the record-high, the prices haven’t returned to the level of 2017-18.

The decision to depreciate the rupee against the US dollar and later allowing the market to determine the exchange under the IMF dictates laid the foundation of the purchasing power crisis. It is not surprising that these government decisions in the post-Panama Papers Pakistan has pushed millions of people into poverty.