KARACHI, May 27: The administrations of the Karachi Electric Supply Corporation and the Water and Power Development Authority have intimated the government that collection of general sales tax and electricity duty makes electricity bills unnecessarily inflated.

Well-placed sources told Dawn that every year the KESC paid Rs300 million to the Sindh government under the head of electricity duty. “Similarly, the KESC and Wapda pay Rs21 million to the Central Board of Revenue every year. The collection made by the KESC and Wapda is 25 per cent of the total revenue earned by the CBR. These two utilities collected Rs3 billion as withholding tax.”

They added that while the power tariff in India and Pakistan was almost identical, it was the collection of general sales tax, electricity duty and withholding tax that made electricity bills in the country more inflated.

Elaborating this point, they maintained that Pakistan was one of the few countries in the world in which utilities collected general sales tax as well as withholding tax from consumers.

They suggested that the government relieved the KESC and Wapda of the job of collecting general sales tax and withholding tax which would go a long way towards bringing down power bills.

“As a rule of thumb, the KESC does not receive 21 per cent of the power charges — 15 per cent general sales tax and six per cent electricity duty.”

They said that other reasons of a rise in power tariff were phenomenal increase in the prices of furnace oil and natural gas.

“In May 1999 — the year the army took over the management of the KESC — the price of furnace oil was Rs5,500 a ton. At present, the price of furnace oil is around Rs10,300 per ton, showing an increase of over 87 per cent. Now, furnace oil and natural gas constitute 90 per cent of the total input used by the KESC for power generation. But the increase in power tariff has not been in proportion to the rise in input price.”

They added that the financial health of the power utility was far from sound, so much so that it owed Rs10 billion to Wapda.

Analysts maintain that under the dictates of the International Monetary Fund, the government has not done well to impose a 15 per cent general sales tax on almost every thing under the sun. “A consumer pays the 15 per cent general sales tax on the three utility bills: electricity, telephone and gas. Besides, he pays the 15 general sales tax on the drugs he purchases. Furthermore, if he eats out he pays the 15 per cent general sales tax on the foodstuff he consumes, so on and so forth.”