Electricity bills: Discos' income tax may be passed to consumers, about 50 paisa a unit, industry says

The government has reportedly assured electricity distribution companies (Discos) that their income tax will be passed on to consumers through tariffs, Business Recorder reported on 25 October, citing industry sources. Industry estimates the minimum turnover tax alone adds about 50 paisa a unit to a tariff of around Rs 35. There is no official notification yet.

The amounts reported

The tax in question is the minimum turnover tax at 1.25% of turnover. Because it is charged on turnover, not profit, a Disco owes it even in a year it makes a loss. In HESCO's case the FBR has reportedly told the company to count government subsidies as turnover, which creates the Rs 3 billion demand: subsidy meant to cut bills would end up raising the tax recovered through them.

Industry sources told the paper that some companies had their minimum tax cut to as low as 0.2%, and that gas utilities SNGPL and SSGC pay 0.75%.

What 50 paisa a unit means for you

Sales tax charged on top of the energy cost would add a little more. Run your own units through the electricity bill calculator or the units calculator.

The objections

Industrial consumers argue the arrangement removes any reason for Discos to control costs and asks users to pay a commercial tax. They want Discos exempted or made to pay from their own resources, a clear rule for loss years, and an answer on privatisation: if private investors take over Discos, would consumers still fund tax on the new owners' profits?

Any tariff change has to go through NEPRA hearings before it reaches bills. We will update this story when a petition or notification is filed.