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Express Tribune
a day ago
- Business
- Express Tribune
DISCOs seek recovery of billions
Listen to article Electricity consumers are expected to face a tariff hike in financial year 2025-26 under the multiyear tariff regime. A majority of power distribution companies (DISCOs) have submitted petitions to the power-sector regulator, seeking the recovery of billions of rupees from consumers to meet their annual revenue requirements. The National Electric Power Regulatory Authority (Nepra) will conduct a public hearing on June 13 in response to the petitions. All eight government-owned DISCOs have approached Nepra with requests for an interim tariff increase for fiscal year 2025-26. The petitions, under the multiyear tariff (MYT) regime covering the period from FY 2025-26 to FY 2029-30, have been filed by Gujranwala Electric Power Company (Gepco), Multan Electric Power Company (Mepco), Quetta Electric Supply Company (Qesco), Sukkur Electric Power Company (Sepco), Hyderabad Electric Supply Company (Hesco), Peshawar Electric Supply Company (Pesco), Tribal Areas Electric Supply Company (Tesco) and Hazara Electric Supply Company (Hazeco). The revenue requirements of these DISCOs show a significant financial burden for the upcoming fiscal year, which may be passed on to consumers. Mepco has sought the highest interim revenue requirement of Rs139.1 billion, followed by Pesco at Rs81.4 billion, Gepco at Rs67.8 billion, Sepco at Rs58 billion, Qesco at Rs50.1 billion, Hesco at Rs39.4 billion, Hazeco at Rs12.3 billion and Tesco at Rs7.3 billion. Mepco has also made a higher demand on account of operations and maintenance (O&M) cost at Rs63.1 billion, largely driven by staff pay and allowances of Rs22.3 billion, post-retirement benefits of Rs29 billion, and repair and maintenance expenses of Rs7.8 billion. Gepco reported O&M cost of Rs35.3 billion, including Rs16.6 billion for pay and allowances and Rs13.8 billion for retirement benefits. Pesco's O&M cost was estimated at Rs37 billion, with Rs32.7 billion alone allocated to salaries. Other companies also cited sizeable O&M allocations. Hesco claimed Rs25.1 billion, Sepco Rs22.2 billion, Qesco Rs17 billion, Tesco Rs3.8 billion and Hazeco Rs7.8 billion. Depreciation and the return on rate base (RORB) formed another significant part of the cost buildup. Mepco again topped the list with Rs8.9 billion in depreciation and Rs16.3 billion in RORB. Gepco followed with Rs4.8 billion in depreciation and Rs8.8 billion in RORB. Pesco sought Rs5.6 billion and Rs12.3 billion under the same heads, while Hesco demanded Rs3.2 billion in depreciation and Rs6.8 billion in RORB. Qesco's RORB was estimated at Rs15.7 billion alongside Rs297 billion for depreciation. Some power distribution companies have sought adjustments for prior years as well, which resulted in an increase in revenue requirements. Mepco claimed Rs59.5 billion, Pesco claimed Rs29.3 billion, Gepco sought Rs24.4 billion and Sepco requested Rs25.6 billion. Qesco and Hesco requested Rs16.3 billion and Rs5.8 billion, respectively, while Tesco and Hazeco did not include prior year adjustments. Tesco and Sepco also factored in bad debt provisions, with Rs1.6 billion and Rs5.6 billion respectively. Sepco also reported Rs1.6 billion in finance costs. To consider these petitions, Nepra has scheduled a public hearing on June 13 and invited all parties to submit their views and comments in response to the revenue requirements made by the distribution companies.
Express Tribune
03-05-2025
- Business
- Express Tribune
Govt may set Rs14.3tr tax target for next fiscal
Listen to article The government may set a new tax target at over Rs14.3 trillion, which is higher by Rs2 trillion over this fiscal year's downward revised goal and may require at least Rs500 billion in additional measures to achieve it. After working out the new tax target figure for the fiscal year 2025-26, the government has begun the exercise to shortlist measures that it would need to show that the Rs14.307 trillion goal is realistic and achievable. Finance Minister Muhammad Aurangzeb is expected to deliver his second budget speech either on June 2 or June 3 before Eid holidays. The Rs14.307 trillion target is equal to 11% of the next fiscal year's projected size of the economy. A senior official of the FBR told The Express Tribune that the absolute tax target number may change, depending upon the size of the economy but the 11% of the GDP figure would be the target. The development came as the deadline to inform the businesses about accepting or rejecting their budget proposals has lapsed. The government had invited proposals from various chambers and business associations in January with a promise to respond to them by the end of April about how many of those can be realistically accepted. When contacted, Finance Minister Muhammad Aurangzeb said that the review of the budget proposals was underway as these proposals are still coming in. The Rs14.307 trillion for fiscal year 2025-26, starting from July, is tentative and subject to the endorsement by the International Monetary Fund that is visiting Pakistan from May 14th to vet the budget. The Rs14.3 trillion target is 16% or Rs2 trillion more than this year's Rs12.3 trillion downward target, the government sources said. It is also higher than the figure that the FBR pitched to the Finance Minister, which was significantly less than the target that the government wants to set for the tax machinery. For this fiscal year, the government had set the original tax target of nearly Rs13 trillion or 10.6% of the GDP. Due to lower inflation and lower economic growth, the target has downward been revised to Rs12.3 trillion but it remains constant at 10.6% of the GDP. The sources said that the authorities will have to take about Rs500 billion worth new tax measures to make the next target realistic and to end any uncertainty associated with it. These measures would come over and above Rs1.3 trillion additional taxes, which were imposed on the people, mostly on the salaried class, to achieve this year's target. Despite putting an extraordinary burden on the people, the FBR has so far faced the tax shortfall of Rs830 billion, underscoring that the economy's ability to pay more has eroded without broadening the base. What is equal to a mini-budget, the government has already increased the petroleum levy rate by Rs18 to Rs78 per liter under different pretext to offset the impact of FBR shortfall. FBR Chairman Rashid Langrial said on Wednesday that next year's budget would be tough in terms of achieving tax targets, forewarning the people about the upcoming taxation measures. OICCI budget proposals Meanwhile, Finance Minister Muhammad Aurangzeb held a meeting with the Overseas Investors Chamber of Commerce and Industry (OICCI) to discuss its budget proposals. The OICCI was not informed whether any of its proposals would be accepted. The association has suggested the government to withdraw Rs5,000 currency notes to discourage cash economy. The size of the informal economy is estimated at least 40% of the formal economy but the government does not seem serious about cracking down on the informal economy. The OICCI also recommended exempting the chemical dealers from 2% withholding tax that is charged from the distributors on supplies to traders. In an important proposal, the association has also demanded to abolish 10% surcharge on individuals earning Rs10 million or more on compliant taxpayers as it places an unjust burden on regular filers. Pakistan's highly marginalized salaried class paid Rs391 billion in taxes in just ten months. The salaried class paid 10% of the total income tax paid by the entire Pakistan compared to 0.6% paid by blue-eyed traders. The OICCI has recommended the government to exempt up to Rs100,000 monthly income from tax, which is justified demand given the fast eroding purchasing power of the people. It has suggested that in order to retain the number of filers, the government may impose Rs1,000 token tax for incomes above Rs600,000 to Rs1.2 million annual income. It has also demanded tax credit for deductible allowances for housing loans, education, and medical expenses. The OICCI has recommended limiting taxation of company contributions to Provident Fund to 10%, eliminating the Rs150,000 cap. It has also sought specific exemption of capital value tax of% on foreign assets for expatriate Pakistanis returning and foreign nationals becoming resident employees. In a major proposal, the OICCI has demanded reducing the corporate income tax rate gradually from 29% to 25% through an annual 1% reduction to align with other emerging economies. It has sought abolishing the super tax gradually over three years, in the first phase cutting from 10% to 6% from July. The OICCI has demanded abolishing 15% income tax on payment of dividends, which takes the rate to 64% for some companies. The OICCI has also demanded to reduce sales tax to 17%, which the government may not accept due to its major dent on the budget. The association has asked to declare petroleum products as taxable supplies allowing input tax adjustments but the FBR showed reluctance due to the IMF programme. It also rightly demanded reducing tax on packaged milk to 5% from 18% to encourage growth in the dairy sector, enhancing nutrition and affordability for the general public. In another major proposal, the OICCI has asked to restore zero rating of sales tax on local supplies under Export Facilitation Schemes (EFS) by withdrawing 18% GST. The IMF is not in favour of withdrawing this tax. The OICCI has asked to reduce federal excise duty on aerated waters to 18% and juices to 15%, which has adversely affected the growth of these companies.
Express Tribune
26-03-2025
- Business
- Express Tribune
PM hails $1.3 billion IMF deal as major economic milestone
Listen to article Prime Minister Shehbaz Sharif on Wednesday hailed the successful staff-level agreement with the International Monetary Fund (IMF) for a new $1.3 billion arrangement, calling it a major milestone in Pakistan's path toward economic stability. Chairing a Cabinet Committee meeting in Islamabad, the prime minister applauded the efforts of the deputy prime minister, finance minister, planning minister, commerce minister, economic affairs minister, FBR chairman, and other senior officials for securing the deal. 'Despite scepticism and predictions of a mini-budget, we secured this agreement without imposing new taxes,' Shehbaz Sharif said. He also acknowledged the burden placed on the public during this phase, paying tribute to salaried individuals for their key role in tax contributions. The agreement will bring $1.3 billion in IMF funding, raising Pakistan's foreign reserves to $8.3 billion, which the prime minister termed a 'big achievement.' Shehbaz Sharif highlighted that tax collection had exceeded IMF expectations, achieving a 10.6% tax-to-GDP ratio, the highest in four years, with a 26% year-on-year increase in tax revenue. He also outlined how Pakistan retained a Rs12.3 trillion tax target for FY2024-25, after resisting IMF recommendations to lower it. The prime minister said reforms in the sugar sector led to an additional Rs12 billion in tax collection, with the model soon to be applied to the cement, tobacco, and textile sectors. He added that Rs34 billion had been recovered from pending tax cases after fast-tracking tribunal processes. To support low-income families, he noted that the Ramadan package this year used a digital wallet system for transparent disbursement. Shehbaz also stressed the link between peace and economic progress, vowing to continue efforts to eliminate terrorism and ensure security across the country. He welcomed the Nishan-i-Pakistan award conferred on Shaheed Zulfikar Ali Bhutto by President Asif Ali Zardari, calling it a fitting tribute to a 'national icon.' The meeting concluded with condolences on the death of the mother of Chief of Army Staff General Syed Asim Munir, and a prayer (Fateha) offered in her memory.
