Nepra seeks details of taxes being collected from electricity consumers from Power Division

ISLAMABAD-The matter of collecting heavy taxes including income tax through electricity bills was Tuesday echoed in NEPRA hear­ing, as the regulator completed formality for passing on the bur­den of Rs1.52 per unit surcharge to the K-Electric consumers. 

In a public hearing arranged by National Electric Power Reg­ulatory Authority, the regulator has directed the Power Division to submit the details of how many taxes are being collected from electricity consumers in their bills. NEPRA has con­ducted a public hearing on the federal government’s motion for levying a surcharge which will burden the KE’s consumers by an additional Rs 24.5 billion during the ongoing fiscal. The regulator has noted that the case of the government to im­pose surcharge was not strong.

Instant motion was filed by the federal government with respect to Consumer End Tariff recommendations of KE to NEE­PRA so as to consider surcharge of Rs1.52/unit. It is important to mention that during the pe­riod from July 2019 to Septem­ber 2020, the consumer tariff of KE was not increased uniformly as compared to XWDISCOs due to pending decisions at various forums. During the hearing, it was informed that decision re­garding quarterly adjustment was taken in May 2019. How­ever, it was not implemented due to Covid. However, other distribution companies had implemented the decision of quarterly adjustment. “Why are we referring to surcharges rather than increase in electric­ity rates on account of quarter­ly adjustment,” Nepra officials asked. Power Division officials said that Nepra had suggested two ways to recover amount from the consumers either through subsidy or imposing a surcharge. NEPRA was also in­formed that end user tariff was Rs 32 per unit and there was 10 percent space for levying a surcharge. This is why Power Division has proposed increase in tariff on account of levying surcharge of Rs 1.52 per unit, Power Division official said.

Nepra also raised question whether it was prudent cost of electricity which government was seeking to recover from the consumers. It was informed that collection through power surcharge could be used for public sector projects and pay off financial obligations of the government. Nepra official said that a surcharge of Rs 1.52/unit will cover three-year-old collections from the KE’s con­sumers. Why such old receipts were not requested earlier, Ne­pra questioned. K-Electric and consumers were in court which also led to the delay, Power Di­vision officials said. And also due to Covid, the government had stopped to pass on the ad­ditional load to the consumers, official of the Power Division further added. An amount of Rs 275 billion was to be recov­ered from the KE’s consumers that amounts to Rs 17/unit, however, instead of burdening the consumers for the entire amount ,the government had decided to cover a major por­tion of the amount through subsidy, official of the Power Division said during hearing.

The federal government will bear the burden of Rs 250 bil­lion in the form of subsidy, while only Rs 25 billion burden will be put on the electricity consumers, he added. Member Sindh in NEPRA, Rafiq Shaikh has asked the officials of the Power Division, “This is a quar­terly adjustment then why you named it as surcharge.”. Power Division officials replied that there was a legal issue in recov­ering the amount with retro­spective effects. The recovery of old outstandings due could lead to a legal debate and there­fore, the government named it as power surcharge. “It should be decided first whether it is a surcharge or in the form of quarterly adjustments,” Rafiq Shaikh further said. Similarly, pointing towards the govern­ment motion, member Sindh said that in this application, a hike has also been requested for the lifeline consumers. However, the official of the Power Division said that the hike will not be applicable to lifeline electricity consumers.

It is also necessary to first clarify that lifeline should not be included, Nepra official told Power Division. The fed­eral government will be asked again for the correctness of the lifeline category of the con­sumers whether it will be ap­plicable to them or not, Nepra officials maintained. The mat­ter of collecting heavy taxes in­cluding income tax from people through electricity bills also echoed during the hearing. 

Nepra took notice of this matter and decided to hold a separate session regarding col­lection of taxes from electricity consumers. Notices will be is­sued to all participants before the session,” Nepra officials said. Power Division officials said that the Power Division itself does not collect or levy any tax and they are collected by Ministry of Finance and Fed­eral Board of Revenue (FBR).

It is better to call the Minis­try of Finance or FBR on this matter, Power Division officials said. However, they claimed that taxes are being collected from electricity consumers as per rules. How much income tax is to be collected from the electricity consumers is speci­fied in the Income Tax Act,” Ne­pra officials asked. Nepra has directed to submit the details of how many taxes are being collected from electricity con­sumers. The authority will hold a separate full session on the matter, Nepra said. The Nepra completed the hearing and re­served decision on additional surcharge of Rs 1.52/unit and said that it will issue a decision after reviewing the data. In case of approval, there will be a bur­den of more than Rs 24.5 billion on K-Electric consumers.