Karachi, August 29, 2023 – The Federation of Pakistan Chambers of Commerce and Industry (FPCCI) has called for immediate sales tax exemptions on electricity bills to alleviate the financial burden on the public.
FPCCI President Irfan Iqbal Sheikh, during a press conference, proposed several measures aimed at reducing electricity costs and supporting businesses.
President Irfan Iqbal Sheikh emphasized the need for negotiations between the government and power plants to extend the debt payment period. This, he argued, would help reduce the capacity component within the power tariff. He urged the government to temporarily suspend the imposition of sales tax for a period of 6 to 8 months to lessen the overall cost of doing business.
Sheikh highlighted the growing electricity prices, citing the National Electric Power Regulatory Authority (NEPRA) forecast for power purchase prices in the fiscal year 2023-24. According to NEPRA’s projections, consumers would bear a significant financial burden, with 68 percent of costs allocated to fixed capacity payments, primarily benefiting coal-based power plants.
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Furthermore, Sheikh expressed concerns about soaring fuel costs, especially petroleum imports, which could lead to volatility and strain on foreign exchange reserves. This situation prompted an increase in consumer-end tariffs effective from July 1, 2023.
FPCCI vehemently opposed the recent hike in electricity prices, asserting that it places an unbearable burden on both residential and commercial consumers. Inflation, combined with these elevated electricity costs, is making it increasingly difficult for businesses to remain profitable and avoid bankruptcy.
Sheikh pointed out that residential consumers are already grappling with their electricity bills, often paying an extra 15-20 percent through various adjustments and surcharges. In addition to these charges, residential consumers face an extra 20-25 percent in the form of electricity duty, sales tax, and income tax.
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Commercial consumers are similarly burdened with additional taxes and duties, contributing to 37-40 percent of their total electricity charges. Sheikh provided an example of a commercial consumer with a monthly consumption of 5000 kWh, who would be charged a hefty Rs. 381,785. Of this amount, approximately Rs. 135,994 goes directly into government coffers in the form of taxes and duties, not including additional surcharges and fuel cost adjustments.
Sheikh stressed the urgent need to explore more viable options to meet the International Monetary Fund’s (IMF) requirement to address circular debt and provide affordable electricity to consumers. This includes reducing the operational costs of power distribution companies, eliminating the provision of free electricity to WAPDA employees, reducing transmission and distribution losses, and tackling electricity theft.
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He warned that businesses cannot sustain themselves with the current electricity rates, and the economic growth of the country is at risk. Many small and medium enterprises may be forced to close due to the high operational costs. President Sheikh concluded by stating that while the business community has historically supported the government, the current electricity bills are unsustainable, given the prevailing economic challenges and record inflation.
