Karachi, August 12, 2024 – The Federation of Pakistan Chambers of Commerce and Industry (FPCCI) has launched a fierce critique against the country’s harsh taxation policies and soaring electricity tariffs, calling for urgent reforms to alleviate the financial strain on businesses and the national economy.
In a statement released on Monday, FPCCI Vice President Asif Sakhi condemned the imposition of tax notices amounting to Rs 60,000 per month on small traders and industries. Sakhi highlighted that such punitive measures are causing severe distress among the business community. “The Tajir Dost Scheme was intended to facilitate small traders by easing their registration in the taxation system and providing benefits, not by burdening them with harsh tax notices,” he emphasized.
The FPCCI gathered a coalition of small traders, small industries, and shopping centers in Karachi to address the dual crises of excessive taxation and high power tariffs. Sakhi pointed out that these tax notices are not only unwarranted but are also contributing to significant unrest and harassment among small business owners. He urged the federal government to withdraw these notices to protect the interests of the national economy.
Another major concern for the FPCCI is the crippling cost of electricity, exacerbated by capacity charges imposed by Independent Power Producers (IPPs). Sakhi demanded that the federal government renegotiate existing agreements with IPPs and seek electricity from more cost-effective sources. Noting that 52 percent of IPPs are government-owned, he suggested that restructuring power purchase agreements (PPAs) could be achieved relatively swiftly.
Sakhi also highlighted the severe impact of exorbitant electricity tariffs on the industrial sector, leading to widespread closures and significant job losses. With an installed generation capacity exceeding 40,000 MW, but a peak demand and transmission capacity of only 25,000 MW, there is a considerable excess in generation capacity that remains underutilized. He criticized the PKR 2 trillion capacity payments to 40 companies, which are paralyzing the national economy and contributing to escalating circular debt.
Furthermore, Sakhi noted that capacity charges account for two-thirds of the total electricity cost, with fuel costs comprising the remaining third. He criticized the returns of IPPs, which exceed 73 percent in dollar terms, as predatory compared to international standards. This situation has led to an unsustainable circular debt approaching PKR 2.8 trillion.
Khurram Ejaz, former VP of FPCCI and advisor on FBR affairs, added that guarantees indexed to the US dollar exacerbate the financial burden, as any depreciation of the Pakistani rupee increases returns for IPPs. This practice, he noted, is significantly higher than global norms and best practices.
The FPCCI’s call for reform underscores the urgent need for comprehensive policy changes to address the financial challenges facing Pakistan’s business and energy sectors.
