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Express Tribune
3 days ago
- Business
- Express Tribune
MYT impact estimated at over Rs300b
The Power Division has urged Nepra to align KE's tariff structure with national standards to ensure fairness, transparency and affordability. photo: file The Power Division has challenged the regulator's decision on granting a multiyear tariff (MYT) to K-Electric (KE), alleging that it will allow the company to collect over Rs300 billion from consumers. "The total financial impact is in excess of Rs300 billion of the interventions identified for review by the government of Pakistan in the KE MYT," the division said in a review petition submitted to the National Electric Power Regulatory Authority (Nepra). It has asked Nepra to revisit its recent approval of electricity rates for KE, Karachi's main power supplier. KE's new tariffs come into effect from financial year 2024-25 and will run through FY30. The government believes that Nepra has allowed several cost items and profit margins to KE that are higher or more favourable than for any other utility in Pakistan, resulting in unnecessarily high bills for consumers and extra pressure on public finances. The Power Division has raised serious concerns over the preferential treatment granted to KE. Nepra set KE's fuel cost benchmark at Rs15.99 per kilowatt-hour (kWh), significantly higher than the rates paid by other utilities purchasing power from the national grid. This discrepancy adds Rs28 billion in FY24 and Rs13 billion in FY25 to the federal budget, shielding KE customers from these costs. KE also received a "recovery loss allowance," despite its actual recoveries exceeding the threshold set by Nepra. No other utility enjoys this privilege, which has generated Rs36 billion in FY24 and Rs35 billion in FY25 for KE, amounting to over Rs200 billion in seven years. Furthermore, Nepra allowed KE a 24% markup on working capital – higher than any other utility – boosting revenue by Rs2.4 billion in FY24 and Rs15 billion over seven years. Additionally, a higher distribution loss target of 13.90% (vs KE's own 13.46%) was set, passing Rs3.1 billion in FY24 and Rs21 billion over the seven-year period on to consumers. A unique 2% "law and order" margin was granted to KE, despite an improved security situation. This adds Rs14 billion in FY24 and Rs99 billion over seven years. KE was also allowed to retain "other income" from fines and investments, which should have offset customer costs. Transmission losses were overestimated at 1.30% (vs actual around 0.75%), and KE keeps 75% of savings, creating inefficiency and costing Rs4 billion in FY24 and Rs28 billion over the seven-year period. Excessive returns were also permitted. KE enjoys a 12% return on equity (RoE) in US dollar (around 24.46% in Pakistani rupee) on generation, compared to National Transmission and Despatch Company's (NTDC) 15% in rupees, and 14% RoE in US dollar (around 29.68% in PKR) on distribution, far exceeding the 14.47% RoE in rupees for others like the Faisalabad Electric Supply Company (Fesco). Idle KE power plants still receive capacity payments, costing Rs12.7 billion in FY25 and Rs82.5 billion overall. Generous inflation indexation and a 17% RoE for these plants further strain finances. The Power Division urged Nepra to align KE's tariff structure with national standards to ensure fairness, transparency and affordability, stressing the need to eliminate unjustified allowances and ensure equal treatment for all utilities. KE eyes DISCO acquisitions K-Electric held a corporate analyst briefing on Monday to provide insights into its recently approved tariffs and operational updates. The company expressed openness to acquiring other DISCOs (distribution companies), should the privatisation process move forward, according to Arif Habib Limited. Its management highlighted that KE's total generation capacity currently stands at 2,397 megawatts (MW) from internal sources, while it procures over 1,600 MW externally. With the anticipated completion of NTDC interconnection projects, an additional 400 MW is expected to be integrated into its grid. The utility's robust transmission network now comprises 7,095 MVAs capacity, 74 grid stations and 1,394 km of lines, while its distribution infrastructure includes 8,964 MVAs capacity, 2,112 feeders and over 31,000 pole-mounted transformers (PMTs). Since its privatisation in 2005, KE has added 1,957 MW to its generation capacity, improved efficiency from 30% to nearly 46%, doubled transmission capacity and cut transmission and distribution (T&D) losses from 34.2% to 16%. The utility estimates a cumulative saving of Rs900 billion for the government and consumers, alongside annual fiscal savings of Rs164 billion due to lower aggregate technical and commercial (AT&C) losses. Nepra has approved a multi-year tariff (MYT) structure of Rs39.98/kWh for KE, lower than the utility's request for Rs44/kWh. Return on equity (RoE) has been set at 14% for generation/distribution and 12% for transmission, with a 70:30 D/E ratio. The cost of local and foreign debt has been capped at Karachi Interbank Offered Rate (Kibor) + 2% and Secured Overnight Financing Rate (SOFR) + 4.5%, respectively.
Express Tribune
4 days ago
- Business
- Express Tribune
Food price disparities persist across metropolis
A steep and widespread increase in the prices of perishable food items has been observed across the provincial capital this week, highlighting the ineffectiveness of official measures aimed at curbing artificial inflation and profiteering. Despite repeated claims by the Punjab government, enforcement of the official price list remained virtually ineffective in markets. Retailers openly flouted the government-fixed prices despite then recent establishment of a price monitoring department led by a secretary. Live chicken prices were officially reduced by Rs28 per kilogram this week, bringing the rate to Rs369383 per kg. However, it was generally unavailable, while chicken meat sold for Rs580690 per kg and boneless chicken for Rs900 to Rs1,050. Among vegetables, the official price of A-grade soft skin potatoes increased by Rs10 to Rs5560 per kg, but they were sold at Rs120140 per kg. B-grade potatoes, fixed at Rs4550, and C-grade at Rs3540, were sold as mixed lots for Rs80100 per kg. Sugar-free potato prices also rose, with A-grade set at Rs4550 but sold for as high as Rs100 per kg. A-grade onions, fixed at Rs3540, were sold for Rs80 per kg. Similar disparities were observed in B- and C-grade onions. Tomatoes followed the same trend, with A-grade fixed at Rs3540 but retailing between Rs80 and Rs120 per kg. Garlic and ginger prices showed notable increases. Locally produced garlic, officially priced at Rs176185 per kg, was sold for Rs200250, while Chinese garlic, fixed at Rs252265, was sold for Rs400. Ginger prices dropped on paper, with the Thai variety set at Rs582610 and Chinese at Rs535580 per kg, yet both were sold for Rs8001,000 per kg. Spinach, fixed at Rs3540, was sold for up to Rs100 per kg. Other items showing significant disparities included cabbage (Rs4750, sold at Rs120150) and Chinese carrots (Rs5255, sold at Rs200250). Among fruits, apple prices surged by Rs30, with official rates ranging from Rs250 to Rs420 per kg, but market prices reached Rs800 per kg. Bananas were also sold well above official prices. Papaya, melon, watermelon, cantaloupe, peach, and phalsa all recorded price gains, with official rates far lower than selling prices.
Express Tribune
22-05-2025
- Business
- Express Tribune
Power generation hits 4-year high in April
Listen to article Pakistan's power generation in April 2025 surged to 10,513 gigawatt-hours (GWh), reflecting a robust 22% year-on-year (YoY) and 25% month-on-month (MoM) increase — the highest monthly generation recorded in the past 48 months, according to data published by the National Electric Power Regulatory Authority (NEPRA). "Power generation in April'25 surged by 22% YoY, highest in 48 months, to 10,513 GWh," wrote Arif Habib Limited (AHL). Despite this sharp rise, generation remained broadly aligned with the regulatory reference level, helping produce a positive Fuel Cost Adjustment (FCA) for the month, the first since June 2024. "Shift to expensive fuel mix resulted in the first positive FCA after June 2024," said Research Head of Optimus Capital, Maaz Azam. The uptick in generation is largely attributed to soaring electricity demand, spurred by rising temperatures and reduced reliance by industries on captive power generation. Analysts believe the shift was also influenced by lower grid tariffs, which made national grid electricity more attractive compared to captive sources. "The rise in generation is attributed to increased demand, driven by a reduction in tariffs," said Research Head of AHL, Sana Tawfiq. Cumulative power generation during the first 10 months of the fiscal year 2025 (10MFY25) reached 100,661 GWh, showing a marginal decline of 0.4% YoY from the same period last year. In terms of source-wise contribution, hydropower (hydel) led the mix with 2,306 GWh (22% share), up 11% YoY, followed by re-gasified liquefied natural gas (RLNG) at 2,157 GWh (21%) and nuclear at 1,882 GWh (18%). A notable highlight was the 59% YoY growth in local coal-based generation, which rose to 1,540 GWh, supported by increased utilisation and favourable fuel costs. Conversely, generation from imported coal and natural gas declined by 32% and 26% YoY, respectively, reflecting deliberate cost-cutting and fuel optimisation strategies. Wind and solar energy maintained a combined share of 9.2%, consistent with seasonal patterns, while residual fuel oil (RFO) re-entered the generation mix with 83 GWh at a steep cost of Rs28.77/kWh. From a policy perspective, a significant development in March 2025 was the imposition of a Rs791/mmbtu levy on gas-based captive power plants (CPPs), raising their effective gas tariff to Rs4,291/mmbtu. According to estimates by AKD Securities, this translates into a staggering generation cost of around Rs42/kWh for off-grid captive units operating at 35% thermal efficiency. This steep cost differential prompted many industrial users to switch to relatively cheaper grid electricity, which averaged around Rs28/kWh (excluding taxes and duties). While the fuel cost of power generation rose by 8% YoY to Rs9.92/kWh in April 2025, driven by a heavier reliance on expensive fuels like RLNG and RFO, the average cost of generation actually fell on a MoM and YoY basis. It dropped to Rs8.95/kWh, down 5% YoY and 8% MoM, compared to Rs9.75/kWh in April 2024reflecting improved fuel mix efficiency and lower reliance on imported fuels. According to Optimus Capital Management, the total generation of 10,513 GWh in April was slightly below the reference level of 10,550 GWh, a shortfall of just 0.4%. However, changes in the fuel mix were stark. Hydel power dropped by 28.6% versus its reference (3,228 GWh), while coal-fired generation soared by 48.6%, with imported coal usage jumping 115.1% and local coal rising 22.5%. Meanwhile, RLNG generation grew by 42.1%, and nuclear generation fell by 22.3%. The cost impact of this fuel mix shift was significant. RLNG's contribution to fuel cost jumped to Rs4.98/kWh, up from a reference of Rs3.31/kWh. Local and imported coal together contributed Rs3.30/kWh, while nuclear (Rs0.38/kWh) and hydel (zero marginal cost) remained low-cost contributors. The net result was a positive FCA of Rs1.27/kWh, calculated against a reference fuel cost of Rs7.68/kWh. This marked change in fuel mix, particularly the increased reliance on RLNG and coal, alongside stable generation levels, led to the country's first positive FCA adjustment in 10 months, a noteworthy development for both consumers and the broader energy sector.
Express Tribune
06-05-2025
- Business
- Express Tribune
Govt may hike agri input taxes
Listen to article The government may double the excise duty rate on fertiliser to 10% and introduce at least 5% new tax on pesticides in the budget, the two critical inputs for the crops that may get expensive amid heightening challenges for the agriculture sector. Among the other proposals, it is considering starting limiting the tax-free status currently available to the Special Economic Zones from fiscal year 2025-26 and reducing the super income tax rate by 2% to 8%, said the tax officials. However, the reduction in the super tax rate, which could cost Rs28 billion to the government, would depend upon finding other tax avenues, they added. The proposals are part of the government's taxation measures that it wants to introduce in the new budget to achieve the overall Rs14.3 trillion tax target in fiscal year 2025-26, according to the senior tax officials. The government is already charging 5% Federal Excise Duty (FED) on fertiliser, which it wants to double for generating additional around Rs50 billion in the next fiscal year, said the sources. They added that the 5% FED might also be introduced on the pesticides. One of the options was that instead of 5%, the duty on pesticides should also be 10% equal to the fertiliser rate. The government has already committed to the International Monetary Fund (IMF) to increase taxes on agricultural inputs, leaving little room for reversal, even if the Pakistan Peoples Party opposes the move in the budget proposal, said the sources. The farmers have long been complaining to the government about the rising cost of their inputs coupled with their low quality. In its meeting with Prime Minister Shehbaz Sharif, the PPP delegation on Monday had urged the government to prioritise the agriculture sector in the next budget to achieve economic growth. The agriculture sector is already struggling after the government abruptly withdrew the agriculture support price mechanism without timely intimating the farmers. The sector has been grappling with issues of climate change, limited water availability and insufficient reservoirs to store water, which is also now at the centre of India-Pakistan tensions. For the first time, the farmers will also pay income tax at rates ranging as high as 45% from the next fiscal year on the income that they earned from January onwards. At the time of negotiations for the $7 billion bailout package, the federal government had promised the IMF that it would end preferential treatments to reduce distortions. The government had explicitly committed with the IMF that "its large-scale interventions in markets for agricultural commodities, including fertilisers, are no longer fit for purpose" of ensuring food security. The low or no FED rate on the fertiliser and the pesticides are described as "distortions stifling private sector activity and innovation, exacerbated price volatility and hoarding, and placed fiscal sustainability at risk." The IMF and the federal government think that the farmers excessively use fertilisers, which is polluting the environment. The sources said that the government was considering the possibility of reducing the super tax rate by 2% to 8%. The business community has long been demanding to completely abolish the current 10% super tax, which the government charges from high earner individuals and companies. However, due to its major contribution in the tax collection, the government is reluctant to completely abolish it. Some of the companies have also challenged the levy in the courts on the point of collecting it from the past. The government is planning to set the revenue collection target at Rs14.3 trillion or 11% of the GDP for the next fiscal year. The sources said that the IMF has already asked to propose tax measures to achieve this target. The discussions with the IMF will take place from May 14th. There is also a view in the government that the Rs14.3 trillion target can be achieved without taking additional measures, as the new target was 16% higher than this year's revised goals. SEZs The government also promised with the IMF that within 10 years, it will completely abolish the tax-free status of the Special Economic Zones (SEZ). As part of the commitment, the government plans to amend the tax laws in the budget to lower the tax-free status to nine years, starting from July, said the sources. Shehbaz Sharif's government has promised with the IMF that it will refrain from providing companies with fiscal incentives such as tax breaks or other subsidies. In another move, it has engaged the AT Kearney firm for conducting an assessment of the fiscal costs and effectiveness associated with each SEZ. The report will be ready before the end of June, said the sources. According to the plan, the government will not provide new fiscal incentives to any new or existing SEZ, and will not renew existing ones. By end-June 2025, the government will prepare a plan based on the assessment conducted to fully phase out all current SEZs incentives by 2035, subject to pre-existing contractual obligations. During the transition period between 2024 and 2035, the government will replace pre existing profit-based incentives with cost-based incentives, subject to compliance with existing legal commitments. For those cases where contractual provisions allow for early termination or renegotiation of existing SEZ incentives, Pakistan will phase out such incentives insofar as allowed by these legal provisions.
Express Tribune
30-04-2025
- Business
- Express Tribune
Govt violates minimum Rs37,000 wage policy
Listen to article In a startling disclosure at the forum of a parliamentary committee on the eve of International Labour Day, a few government departments and contractors of the Parliament cafeteria are not paying the minimum guaranteed wage of Rs37,000 per month to their employees. This disclosure was made at the forum of the National Assembly Standing Committee on Finance on the eve of May 1 2025, which is celebrated world-wide to promote the cause of the labour class. The evelation about the violation of the minimum wage policy prompted the Finance Minister Muhammad Aurangzeb to promise to take up the issue with Minister for Human Resources and Overseas Pakistanis Chaudury Salik Hussain. Ironically though, the Human Resource Minister's ministry is violating the minimum wage, which Aurangzeb announced in his first budget speech. Hussain's ministry is also one of those violators that are not paying the minimum wage, said Member of National Assembly (MNA) Agha Rafiullah who brought up the issue in the committee. According to a written reply submitted before the National Assembly, MNA Agha Rafiullah revealed that the Overseas Pakistanis Foundation working under the control of the Ministry of Overseas Pakistanis, is paying Rs28,000 monthly to its employees working in various education institutions. This translated to Rs9,000 or 24% less than the minimum guaranteed wage of Rs37,000. The Finance Minister had demanded the names of the violators and upon learning the details, he promised to take up the matter with the Overseas Minister. Additional Secretary Finance Ministry Amjad Mehmood informed the standing committee that upon inquiry, the overseas ministry claimed that it was paying the minimum wage of Rs37,000. "When the government is not honouring the minimum wage commitment, then how can we expect it from the private sector?" remarked committee chairman Syed Naveed Qamar. Agha Rafiullah further disclosed that among the other government departments that were not paying minimum wage were the Ministry for Inter-Provincial Coordination, the National Counter Terrorism Authority, and the National Bank of Pakistan working under control of the Ministry of Finance and Export Processing Zones. He went on to say that even the employees working at the Parliament's cafeteria are not being paid the minimum wage of Rs37,000 by the contractors. According to a list submitted in the NA Committee by MNA Rafiullah, the Pakistan Sports Board and Federal Land Commission were not paying the minimum wage either. Additionally, the National University of Technology under the Ministry of Science and Technology, and Pakistan Television (PTV), were found not complying with minimum wage requirements. He said that the federal directorate of education has also entered into a contract with a non-governmental organisation to pay Rs12,000 to Rs15,000 per month to teachers, which is a violation of the government's policy. Likewise, the Ministry of Interior's licensed private security companies were not paying minimum Rs37,000 wage to their security guards. In his Labour Day message, Prime Minister Shehbaz Sharif has "reaffirmed Pakistan's unwavering commitment to promoting safe, healthy, and dignified conditions for its workers - the real driving force behind our nation's growth and resilience." "The protection of fundamental labour right is enshrined in our Constitution and fully aligns with the International Labour Organiation's (ILO) core conventions, to which Pakistan is a responsible signatory," according to the Prime Minister. He stated that Pakistan has taken significant legislative and administrative reforms to further strengthen workers' protections. Our government has taken important steps to broaden the coverage and impact of institutions such as the Employees' Old-Age Benefits Institution (EOBI) and the Workers Welfare Fund (WWF), ensuring that the fruits of our labour protections are shared more equitably across all segments of the workforce, he added. "On this important day, I urge all stakeholders, including employers, workers, civil society, and government to join hands in building a culture that respects labour, upholds their rights, and creates opportunities of decent work for all," affirmed PM Sharif.
