KARACHI: An agreement between the Karachi Metropolitan Corporation and K-Electric that allows the latter to collect the controversial Municipal Utility Charges and Taxes (MUCT) for the KMC is designed in such a manner that the power utility is authorised to deduct a major chunk of the tax collection in the heads of its service fee, current month of KMC electricity bills and dues already outstanding against the corporation.

According to the agreement, the KMC has authorised the KE to deduct ‘at source’ 7.5 per cent service fee from the monthly MUCT collection. The KE is also authorised to deduct the monthly power bills of the KMC from such collection. The power utility is also entitled to deduct 50pc in the head of its outstanding electricity dues against KMC from the remaining monthly collection of the MUCT.

The information came to light on Friday when a lawyer for the KMC placed the agreement before the Sindh High Court in compliance with the court’s earlier order on a set of petitions filed against the provincial government’s move to outsource the MUCT to the KE.

The agreement, signed in June 2022, stated that the KMC acknowledged a total of Rs1.562 billion on account of outstanding electricity dues as on July 2022 and the same will be deducted by the KE at source in the manner prescribed in the agreement.

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According to the agreement, the KE will collect MUCT from its domestic and non-domestic consumers of electricity through their monthly power bills on behalf of the KMC and to be charged as per consumer category as notified by the KMC from time to time.

The agreement states, “(a) KE to deduct at source 7.5% on total monthly collect of MUCT. (b) KE to deduct at sources KMC monthly electricity bills from monthly collection of MUCT. (c) After deduction of (a) and (b) from the monthly collection of MUCT, 50% from the remaining monthly collected MUCT amount shall be deducted against the outstanding electricity dues of KMC. After deduction of (a), (b) and (c), the remaining amount shall be transferred to the designated account of KMC.”

It stated that in case the processing of any bill of KE was delayed due to any reason beyond its control, the power utility would not be liable to make timely payment to the KMC.

The levy and collection of the MUCT did not extend to the jurisdiction of the respective cantonments within Karachi and if such tax was inadvertently charged from any consumer falling within the jurisdiction of cantonment boards the same will be corrected by the KE in its sole discretion, it added.

About termination of the agreement, it said that the power utility will have the right to terminate the agreement without assigning any reasons thereof by giving a 30-day advance written notice at any time.

The SHC will take up the matter again on April 24.

At a previous hearing, senior lawyer Munir A. Malik, who was appointed as amicus curiae to assist the SHC on the subject matter, had informed the court that the government was required to follow the contract rules and could not nominate KE to collect the MUCT for KMC through the electricity bills.

He added that under the relevant laws, the KE also may not use its coercive powers to collect such a tax.

In 2022, JI-Karachi chief Hafiz Naeemur Rehman and others had filed separate petitions and submitted that after approval of the then Sindh chief minister, the chief secretary had issued a notification on Jan 21, 2022 allowing the provincial energy department and KMC to engage KE for collection of the MUCT under the Sindh Local Government Act (SLGA), 2013.

The petitioners further maintained in the petitions that the MUCT was imposed in the light of a resolution, passed by Karachi Administrator Murtaza Wahab, which was illegal and without following the provision of law.

In Sept 2022, the SHC through an interim order had restrained the power utility from collecting MUCT through electricity bills and appointed former attorney generals Mr Malik and Khalid Jawed Khan as amicus curiae to assist the court on the subject issue and advance their opinion.

Published in Dawn, April 6th, 2024