Discontinuation of ED collection opposed: KP govt urges Power Division to reconsider decision

ISLAMABAD: The federal government’s plan to discontinue the collection of Electricity Duty (ED) has hit another roadblock as the Khyber Pakhtunkhwa (KP) government has formally opposed the move, following the earlier objection by the Sindh government.

The KP government has urged the Power Division to reconsider the decision in the interest of constitutional propriety, cooperative federalism, and fiscal stability.

In response to a letter dated June 30, 2025, from Federal Minister for Power Sardar Awais Khan Leghari, KP Chief Minister Ali Amin Gandapur conveyed strong reservations regarding the unilateral discontinuation of ED collection by the Power Division through Distribution Companies (Discos), without prior notice or consultation.

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Gandapur highlighted the constitutional and legal basis for the imposition of Electricity Duty: (i) under Article 157(2)(b) of the Constitution of Pakistan (1973), provincial governments are empowered to levy taxes on electricity consumption within their jurisdictions ;(ii) according to Section 13(2) of the KP Finance Act, 1964, every distribution licensee is obligated to collect and remit Electricity Duty to the provincial government. This duty constitutes a first charge on the amount recoverable for energy supplied, thereby making it a debt owed to the KP government; and (iii) Rule 5(1) of the West Pakistan Electricity Duty Rules, 1964 requires Discos to list Electricity Duty as a separate item on electricity bills and recover it alongside energy charges.

He further argued that under Section 38 of the NEPRA Act (1997), provinces are authorized to monitor Discos’ compliance regarding billing, metering, and theft cases. The Act also affirms the provincial government’s jurisdiction over electricity consumption charges based on the principle of subsidiarity.

Gandapur pointed out that under Section 36(2) of the State-Owned Enterprises (SoE) Act, 2023, all previous orders, regulations, and instruments remain in force unless repealed. Thus, the KP Finance Act, 1964 and the Electricity Duty Rules, 1964 continue to hold legal standing.

He also referenced Articles 268 and 279 of the Constitution, which provide continuity to existing laws, including taxation statutes, until altered by the appropriate legislature. These protections, he argued, reinforce the provinces’ legal right to collect ED.

The chief minister emphasized that under Article 154(1) of the Constitution, the Council of Common Interests (CCI) is the designated body to formulate and regulate policies related to electricity and oversee related institutions. Therefore, any decision affecting the power sector must be considered and approved by the CCI, with mandatory consultation from the provinces—a process that was not followed in this case.

He noted that three distribution companies—PESCO, HAZECO, and TESCO—operate within KP’s jurisdiction and are legally bound to comply with provincial laws, under the principle of lex situs (the law of the place where the property is situated). The ED, he added, must be collected through the billing system as mandated by law, and there exists no alternate mechanism for its recovery.

“The Power Division’s unilateral administrative decision, without CCI’s approval or consultation with the KP government, is unconstitutional and legally void,” Gandapur asserted. “This measure may unnecessarily fuel federal-provincial tensions.”

The KP government maintains that ED is not a general tax that can be collected through alternative channels, but rather a sector-specific charge that, by law, must be recovered via electricity bills issued by Discos.

The provincial government has sought immediate reconsideration of the decision of Power Division, expressing readiness for constructive dialogue, provided the constitutional and legal frameworks are upheld.

Earlier, Sindh Chief Minister Murad Ali Shah also criticized the federal government, accusing Islamabad of imposing a unilateral decision and advising it to “put its own house in order” before dictating terms to the provinces.

Currently, Discos collect an estimated Rs 60 billion annually as Electricity Duty on behalf of the provinces. While the federal government claims the move is intended to provide relief to consumers, provincial governments argue it undermines their constitutional right.

Power Minister Sardar Awais Leghari has stated that he will present the collective responses of all provinces to the prime minister before deciding on a future course of action.

Copyright Business Recorder, 2025