Power consumers paying four taxes, three surcharges

ISLAMABAD: In the country, electricity consumers are not only heavily taxed, but also deeply surcharged however, in return they are still facing adverse impacts of inefficient power sector in the shape of irritating loadshedding.

Since 2013, the consumers in their electricity bills have been heavily taxed as they are paying three kinds of taxes namely Extra Tax, Further Tax and 5-7.5 percent increase in sales tax apart from paying 17 percent general sales tax.

They are also paying three kinds of surcharges, but the power sector continues to be a black hole in Pakistan’s economy.

The monster of circular debt is very much there as the payables of CPPA (central power purchase agency) are hovering around Rs341 billion and receivables stand at Rs589 billion, reveals the data as of April 2016 available with The News.

So much so, the electricity consumers in Pakistan are not only paying Rs29 billion a year in the head of just debt servicing of the loans borrowed by the power sector and parked in the Power Holding Private Limited (PHPL) but the principle amount of the loans are still there which now hovers at Rs335 billion.

The government borrows additional loss of Rs25 billion which has been paid off to KP government in the head of Net Hydel Profit. The said credit and its debt servicing will also be paid by the consumers.

In toto, the consumers have paid Rs70 billion for the loans parked in PHPL. Apart from it, the government fleeces Rs0.93 per unit from every electricity consumers that includes Rs0.44 per unit in the head of tariff rationalisation surcharge, Rs0.43 per unit as financing cost surcharge and Rs0.10 as Neelum-Jhelum surcharge.

In addition, according to the document shared with Parliament, the consumers have also been paying 17 percent general sales tax (GST) since July 7, 2013 as earlier the GST was charged at the rate of 16 percent.

Extra tax of 5 percent is also being charged to the commercial and industrial consumers which are not registered in active taxpayers list of FBR. The 5 percent percent extra tax is levied once the electricity bill exceeds Rs15,000 a month from July 2013.

In addition, Further Tax is being charged at the rate of 1 percent to all consumers having no Sales Tax Return Number (STRN) from October, 2013 except domestic and agriculture.

The document also unravels the fact that GST is also being charged at Rs7 per unit to the steel melting and rerolling as this new tax is applicable from August 2014. The sales tax will be charged from the retailers at the rate of 5 percent, if the billed amount is up to Rs20,000. The sales tax from retailers will be charged at the rate of 7.5 percent if the billed amount stands above Rs20,000.

Apart from paying heavy taxes and surcharges, the consumers are also receiving inflated bills with an average raise of 30-40 percent, showing the ugly fact that the electric power distribution companies (Discos), in a bid to show better performance in terms of reducing the distribution losses, and electricity theft, have started exposing the consumers to over billing.

In most of the cases, the meter reading is intentionally by Discos being done after 42 days’ time not after 30 days owing to which the consumers lose the benefits of slab and resultantly they have to pay more. Such kind of billing has increased the financial miseries of the consumers.

Joint Secretary (Power) of Ministry of Water and Power, Zargham Eshaq Khan, when contacted, admitted that the electricity consumers are paying four kinds of taxes that include GST, sales tax, further tax and extra tax.

In addition, three kinds of surcharges are also being paid by the consumers. However, he advocated for the ministry efforts in adding substantial amount of electricity in the system and good governance owing to which the loadshedding has been reduced to 6-8 hours. However, if some pockets of Punjab, are facing more loadshedding, it is because of technical faults. Some areas in Punjab where line losses are at higher side, are experiencing more power outages. Mr Khan said that this year the system braved the loss of Rs39 billion because of line losses though the losses had reduced to 17.6 percent.

Mr Khan also said that circular debt was being maintained at the level of Rs340 billion and was not being allowed to increase it because of better receiver of electricity bills and reduction of line losses.

He also admitted that the ministry had paid the interest of Rs29 billion of the loans of Rs335 billion parked in PHPL. He admitted that the principal amount of the loans was still there saying the ministry had managed to get the rollover of the loan for the span of 10 years.

The electricity consumers, however, the sources said, receive inflated bills from respective Discos twice in a year that enables the top functionaries to cover up the loss of Rs50-60 billion which the system is facing in the wake of bad governance, inefficiencies, theft and losses. The overbilling every time in a year is equal to one month’s billing meaning by that the consumers factually pay the electricity bills for 14 months in one year which is sheer injustice to the consumers, top officials of some electric power distribution companies (Discos) told The News.

Top functionaries of some Discos that include Lesco, Fesco, Mepco, Gepco and Iesco told The News on the condition that they were no to be named that the entities were under tremendous pressure by top mandarins of ministries of water and power and finance to collect maximum revenue to show the performance in terms of improving the revenue and reducing the circular debt and that is why they adopted a modus operandi under which masses are subjected to over billing.

In the recent ECC meeting held on June1, 2016, the Ministry of Water and Power, however, says that there was a substantial decrease in customers’ complaints of wrong reading and over-billing. In the same meeting the Ministry of Water and Power also contended that meter readers were compelled to record 100 percent reading due to image printing. ”Excess charging at the will of the meter reader will no more be possible now,” ministry claims. However, the image printing is done only on MoU meters not at the normal meters which is why the people are being fleeced through by wrong bills. And on top of that many MoU meters are also faulty and this issue has also been highlighted by Nepra.

However, about the menace of the inflated bills, consumers are receiving, Joint Secretary Mr Khan said that he himself got the bill with reading of 45 days owing to which slab benefits got eroded and bill automatically increased.

To reduce the human intervention which triggers to heavy bills, he said that the government had started to install smart meters which would have the facility of automatic reading of units. During first phase, in the jurisdictions of LESCO (Lahore Electric Supply Company) and IESCO (Islamabad Electric Supply Company) smart meters are being installed to avoid over-billing. Moreover, the exercise of taking snapshots of the units used in 30 days is being improved. And this kind of exercise is being done in Faisalabad where in 90 percent devices have been installed with 92 percent accuracy of meter reading.