ISLAMABAD:
Caretaker Prime Minister Anwaarul Haq Kakar called an emergency meeting at the Prime Minister’s House on Saturday to try to defuse the rising tensions over skyrocketing electricity prices.
The premier made the announcement on X (previously Twitter), saying, “A briefing will be taken from the ministry of power and distribution companies and consultations will be held regarding giving maximum relief to consumers regarding electricity bills.”
The Power Division and power distribution firms have been ordered to produce a thorough report on the rising costs of electricity in an effort to resolve the concerns of exorbitant electricity bills. Maximum consumer relief is a topic that will be discussed throughout the meeting.
The administration has also decided to terminate the policy of providing free power to officers at the grade 17 level and above as the calls for change grow louder.
Protests across the country had been going on for days at this point, and the public had threatened to take extreme action if their complaints weren’t heard and addressed quickly. This drove the decision.
Electricity bills across the country have been startlingly high this month, leaving people reeling. People’s anger has been awakened as they see themselves on the verge of financial collapse due to the disturbing increase in invoicing and the ever-increasing tax loads.
Meanwhile, warnings of civil disobedience and predictions of large-scale demonstrations loomed ominously.
Read: Protests erupt around the country over rising power costs.
Murtaza Solangi, the interim minister of information, met with Rashid Mahmood Langrial, the secretary of the Power Division, to discuss the problem of skyrocketing electricity prices.
According to the minister, free power units for DISCO employees would also be eliminated, and a summary to restore such benefits for grade-17 and above employees would be submitted at the next cabinet meeting.
During the press conference, the minister stated that 63.5% of residential consumers’ rates would not change due to the increase in power prices, while the remaining 6.5% would be affected by the increase since they use more than 400 units each month.
Substantial Taxes
In addition to rising fuel prices, the hefty levies imposed by the government are a major contributor to skyrocketing electricity bills. Included in these taxes that add up to 40–50% of every bill are things like the power duty, TV fee, GST, GST on Fuel Price Adjustment, and excise duty on FPA.
An electricity duty of 0.5 percent is levied by the federal government and distributed to the states. To further standardise pricing across the nation, a tariff rationalisation surcharge of Rs5 to Rs7 per unit has been implemented.
Electricity bills include a government financial levy of Rs0.43 per unit used.
All electricity customers must pay a general sales tax of 18%, in addition to the income tax that applies to commercial and industrial customers. In addition, fuel price adjustments (FPA) and FPA itself are subject to an excise tax.
Bill adjustments are also included by power distribution firms to recoup the higher electricity charges from consumers. As the average price of power has reached Rs42 a unit, this has prompted an outcry from customers.
Subsidies of up to Rs10 per unit were previously offered by the government to users with monthly consumption of up to 200 units. Customers utilising 200 units saw their bills double since IESCO charged Rs22.9 per unit.
IESCO officials made it clear that only customers who have used the same 200 units each month for at least six months are eligible for the monthly subsidy. Subsidised rates are not available for usage over 200 units per month.
Thankfully, the Senate Standing Committee on Information’s suggestion to add Rs25 in radio charges to every electrical bill has not been enacted.
Tax and fee reductions on electricity bills are not likely in the near future, according to experts. The present interim government is unable to lower or postpone tax collection due to demands from the International Monetary Fund (IMF) to keep fiscal balance. A high base cost of Rs30 per unit is cited as the primary cause of expensive electricity bills.
According to a report by Nepra (the National Electric Power Regulatory Authority), the cost to maintain power plants is included in the base tariff at a rate of Rs23 per unit (about $3.50), with 72% of this money going towards capacity payments.
Already, Nepra’s predictions of a 17 percent inflation rate and a dollar exchange rate of Rs286 have been shown to be off.
The lack of a quick fix is a major concern for analysts. The country is in a difficult position as a result of the delay in establishing tariffs and making recoveries. For the month of September, this means higher than usual electricity costs, which could spark protests and public outcry.
Politicians have also joined the chorus of citizens complaining about their exorbitant electricity costs. Nafisa Shah, a PPP veteran and member of parliament, has questioned the need for the country’s citizens to suffer as a result of the government’s terrible policies.
The Power Division has lately asked Nepra to not carry out the additional Rs5.40 per unit quarterly tariff adjustment (QTA) for the April-June 2023 period. They propose charging customers at a rate of Rs3.55 per unit for six months to lessen the burden of the 26% hike in the base tariff that was announced in July.
Unbundling the power and gas utility firms and privatising them without political or other meddling is the only solution, according to experts.
Taxes range from 58% for businesses to 29% for homeowners.
At the same time, the federal government has revealed to parliament that the Federal Board of Revenue (FBR) was taxing commercial electricity bills by up to 58% and residential bills by up to 29%.
In November of last year, a member of FBR’s inland revenue policy briefed the Senate Finance and Revenue Committee, saying that FBR was charging up to 58% tax on commercial and 29% tax on domestic electricity bills.
The cost of electricity is subject to five distinct taxes.
Domestic customers’ electricity bills now include a 17% general sales tax as well as a 10% advance income tax, both levied by FBR. Those who have not registered for sales tax or who are not already listed as taxpayers will be subject to a surcharge of 3%.
FBR informed the panel that an additional Rs. 1950 plus 12% of the amount surpassing Rs. 20,000 is charged to commercial consumers, while industrial consumers pay Rs. 1950 plus 5% of the amount beyond Rs. 20,000.
#ElectricityBills
An elderly man, apparently driven to despair by his unpayable power bill, jumped to his death from Khanna Bridge in Islamabad, and the hashtag “ElectricityBills” went popular as a result.
The public’s dissatisfaction was widely expressed on social media, with many users posting memes making light of the devastating effects of the higher costs. Users have been spreading fake mosque bulletins that encourage people to stop paying their electric bills.
Worryingly, some people have gone so far as to burn their utility bills or physically assault workers from power distribution firms.
Other than protest actions in numerous regions of the country on Saturday, many more, including news conferences, have been announced for Sunday (today) by the traders and representatives of the business community.
