Massive Taxation Burdens Pakistani Power Consumers, IMF Informed

Massive Taxation Burdens Pakistani Power Consumers/Geo

Sabiha Rajpoot | May 25, 2024 | 10:22 PM IST | Pakistan News, World | Follow on Google News

Massive Taxation Burdens Pakistani Power Consumers, IMF Informed

Massive Taxation Burdens Pakistani Power Consumers, IMF Informed

ISLAMABAD: On Tuesday, officials from the Power Division briefed the visiting International Monetary Fund (IMF) mission about updates in the solar power policy and highlighted the significant burden on power consumers due to heavy taxation. It was revealed that consumers pay Rs800 billion annually in taxes on electricity bills, resulting in an Rs8 per unit increase in their bills. If these taxes were eliminated, the tariff could drop by the same amount. Additionally, electricity duty, PTV fees, and various surcharges further inflate the bills.

Impact of Taxation on Electricity Bills

Despite the possibility of lowering tariffs, officials conveyed that completely removing all taxes from electricity bills isn’t feasible. A reduction of Rs100-200 billion annually is suggested, potentially lowering tariffs by Rs1-2 per unit. To compensate, expanding the tax net to include sectors like retail, real estate, and agriculture is proposed. The 17% General Sales Tax (GST), contributing Rs600 billion in revenue, cannot be removed. However, other taxes totaling Rs100-200 billion might be eliminated.

Prime Minister Shehbaz Sharif has been informed about the severe impact of these taxes on electricity tariffs, with the power sector now deemed unsustainable, unreliable, and unaffordable. The breakdown of consumer payments includes a 1-1.5% Electricity Duty, 17% GST, a PTV license fee of Rs35 for domestic and Rs60 for commercial consumers, a financing cost surcharge of Rs0.43 per kWh, and additional taxes for non-registered industrial and commercial consumers.

Proposed Reforms and Solar Power Policy Changes

Authorities are working on restructuring efforts to improve efficiency and reduce tariffs. One significant measure includes converting imported coal power plants to local Thar coal. Changes in solar power policy were also discussed, with 1938 MW added to the system through rooftop solar under net metering, causing a Rs100 billion revenue shift to non-solar consumers with a tariff hike of Rs1.90 per unit.

New policy proposals involve shifting from net metering to gross metering, reducing the buy-back tariff to Rs7.5-11 per unit. This would reflect the decline in solar panel prices. Under this system, consumers will be compensated for total solar energy generated and exported to the grid at a fixed feed-in-tariff, while purchasing electricity from the grid at Rs60 per unit during peak hours.

The IMF was informed that providing service to rooftop solar consumers imposes significant costs on the national grid. Detaching from the grid would require consumers to install costly batteries for nighttime use, raising their costs to Rs60 per unit. The proposed changes aim to balance these factors and make the power sector more sustainable and affordable.

(Originally published in The News)

Sabiha Rajpoot

Sabiha Rajpoot, a young journalist, having BA- Journalism degree, writes on different scenarios. Sabiha is also a doctor degree at DHMS.