ISLAMABAD: The Khyber Pakhtunkhwa government has sought Income Tax exemptions for its hydel projects at par with power projects of private sector and Azad Jammu and Kashmir (AJ&K).
In a letter to Finance Minister, Senator Muhammad Aurangzeb, Special Assistant to Chief Minister, KPK, on Energy and Power, Brig. Tariq Saddozai (retired) stated that the province is bestowed with enormous hydro power potential which, if exploited in a systematic, planned and transparent manner, can ensure “our energy security on long term basis in a sustainable manner.”
According to the provincial government, the Federal and Provincial Governments are putting their efforts for optimal utilization of this available cheap indigenous resource for the betterment of national economy of Khyber Pakhtunkhwa. GoKP is constructing hydel projects in the Province from its own resources, which is also contributing to meeting the national energy needs and improving the economy, as no major economic activity can be sustained without adequate, cost effective and reliable supply of power.
The profits and gains from hydroelectric power generation are exempted from tax under the Income Tax Ordinance 2001. The income-tax exemption is available to private companies through Clause 132 of Part 1 of the Second Schedule of the Income Tax Ordinance 2001 and WAPDA specifically through entry No. (x) of Clause 66 of Part I of the Second Schedule of the Income Tax Ordinance 2001.
Saddozai further noted that exemption is also available to companies registered in Pakistan or AJ&K owning and managing hydel power projects, set up in AJ&K or Pakistan through a proviso under Clause 132 of Part 1 of the Second Schedule to the Income Tax Ordinance 2001. However, the projects of Pakhtunkhwa Energy Development Organization (PEDO) are not given exemption under the ibid proviso and are thus being subject to discrimination.
He further said PEDO is claiming exemption under this proviso of the Clause 132 of Part I of the Second Schedule to the Income Tax Ordinance 2001. Therefore, following amendments to the Income Tax Ordinance 2001, are proposed to be made: (a) in Clause (66) of Part I of the Second Schedule to the Income Tax Ordinance 2001 after entry (xvii) the following new entry shall be inserted, namely - “(xvii) Pakhtunkhwa Energy Development Organization established under Pakhtunkhwa Energy Development Organization Act 1993 as amended through the Pakhtunkhwa Energy Development Organization Act, 2020, since inception; (ii) (xix) Company(ies) formed by the Government of Khyber Pakhtunkhwa for the purpose of setting up electric power generation projects in Pakistan” : (b) in Clause (11A) of Part 4 of Second Schedule to the Income Tax Ordinance 2001 after entry (xlvi) the following new entry shall be inserted, namely; (i) “(xvii) Pakhtunkhwa Energy Development Organization established under Pakhtunkhwa Hydel Development Organization Act 1993 (| of 1993) as amended through the Khyber Pakhtunkhwa Energy Development Organization Act, 2020, since inception; and (ii) (xvi) Company(ies) formed by the Government of Khyber Pakhtunkhwa for the purpose of setting up electric power generation projects in Pakistan.
The provincial government has sought exemptions as per Section 53 to the Income Tax Ordinance 2001 (Exemption and tax concessions in the Second Schedule), wherein the Finance Division may incorporate the proposed provisions of income tax for the PEDO projects and place before the National Assembly during the budget session 2025-26 for discussion and approval.
GoKP has requested Finance Minister to issue directions to the appropriate authorities to amend the Income Tax Ordinance 2001 through the Finance Bill 2025-26 in the National Assembly, adding that this amendment “will empower our province to harness and develop additional hydro power potential, thereby bolstering its economic stability.”
Copyright Business Recorder, 2025
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