ISLAMABAD : The federal government is likely to reduce electricity tariff by Rs 7 per unit for all categories of consumers including industry after due consultation with the International Monetary Fund (IMF) whose team is due next month, sources close to Power Minister told Newzshewz.
This plan has been unveiled at a time when the Prime Minister Shehbaz Sharif has expanded ” Tariff Reduction Committee” headed by Deputy Prime Minister/ Foreign Minister, Senator Ishaq Dar, with inclusion of Lt. General, Muhammad Zafar Iqbal, National Coordinator Task Force on Energy , who was the key power behind revision on agreements of about 28 IPPs.
” Committee on power tariff reduction shall also include Lt. General, Muhammad Zafar Iqbal, Special Assistant to the Prime Minister on Power, Muhammad Ali and Minister of State for Finance, Ali Pervaiz Malik,” the sources quoted Prime Minister Sharif as issuing directions. In this regard a new notification has already been issued.
Earlier the Committee headed by Deputy Prime Minister Senator Ishaq Dar, was consisted of Minister for Economic Affairs, Ahad Khan Cheema, Finance Minister, Senator Muhammad Aurangzeb, Power Minister, Awais Leghari, Secretary Power, Dr. Muhammad Fakhr e Alam Irfan, Secretary Petroleum, Momin Agha and Chairman FBR, Rashid Langrial.
According to sources, Prime Minister was of the view that in order to boost economic growth tariff reduction proposals presented by the Power Division be refined and finalized for benefit of local industry.
” The proposal is being thoroughly examined by Committee on Power Reduction to determine maximum amount of relief per unit to be provided to the industry to make it regionally competitive, taking into account all related factors/ variables and externalities. The Committee should shall finalize the working including consultation with provinces by February 10, 2025 for implementation from April 1, 2025,” the sources quoted the Prime Minister as saying in his directions.
The sources said, Rs 2 -2.25 per unit relief is expected from revised agreements with the IPPs, Rs 2.90 per unit from elimination of federal and provincial taxes of about Rs 290 billion and remaining relief is expected from reduction in RoE of government owned power projects including provincial projects. The financial impact of taxes on electricity bills is Rs 9 per unit .
Finance Division, which makes commitments with the IMF was of the view the proposed elimination of various federal (Divisible Pool) and provincial taxes on sale of electricity with an estimated revenue impact of Rs 290 billion during January-July 2025, will adversely impact GoP’s commitment with regard to tax revenue collection, overall primary and fiscal balance and provincial surplus under the Extended Fund Facility (EFF).
total financial impact of taxes on consumers’ bills is Rs 964 billion, of which federal share is Rs 391 billion whereas provincial share is Rs 563 billion.
Of Rs 954 billion, impact of sales tax is Rs 708 billion, income tax, Rs 98 billion, advance income tax 4 billion, further sales tax Rs 13 billion, extra sales tax, Rs 54 billion, retail sales tax, Rs 9 billion, electricity duty Rs 53 billion and PTV fee Rs 14 billion.
The government is collecting GST at Rs 18 per cent, income tax 10 per cent if bill is Rs 500-20,000(Rs 1950 + 12 per cent if Rs 20,000), advance income tax(non-filers) 7.5 per cent if bill is Rs 25,000, further sales tax, Rs 4 per cent (for inactive consumer) extra sales tax (5 per cent to 17 per cent for inactive), retailer sales tax (7.5 per cent if bill is Rs 20,000), Electricity Duty 0-1.5 per cent and PTV fee, Rs 35 to 60.
According to Prime Minister, Shehbaz Sharif, he has directed the Power Division to reduce power tariff by Rs 7 per unit so that maximum relief is provided to the consumers.
An official said that 40 per cent burden in electricity bills is related to taxes/ surcharges, which are collected by the FBR, adding that with removal of these taxes, electricity bill will automatically be reduced by 40 per cent.
The Prime Minister apprised the Cabinet of his recent review of the energy sector, during which he was briefed on the commendable work being done by the “Task Force on Implementing Structural Reforms in the Power Sector, in particular its recent successful negotiations with major power companies to revise their contracts. He informed that he had directed the Ministry of Energy to reduce the per unit cost of power by Rs 7, which would be announced by the Government soon. The Prime Minister expressed confidence that the new settlement would be completed before April 2025 in close coordination with the International Monetary Fund (IMF )staring that the commitments to IMF would be honoured.
The Cabinet termed circular debt as a’ bottomless pit’ that was hemorrhaging the economy. It was emphasised that all stakeholders, including the Power Division and FBR had to work together to resolve energy related issues to bring down power tariffs so as to ensure economic expansion driven by export-oriented industrialization. Ends