At a time when taxpayers are worried about high tax rates,
Independent Power Producers (IPPs) have received a tax exemption of Rs 12.17 trillion from the mid-1990s to 2023-24.
According to a Dawn newspaper report, official sources have revealed that tax exemptions for IPPs have exceeded capacity charges.
Expected to have a turnover of Rs 20.91 trillion in the current financial year, these IPPs are owned by 40 influential families who are directly or indirectly linked to the power corridors.
Domestic and foreign companies enjoy corporate tax exemption on profits from electric power plants established after July 1, 1988.
Since then, democracies and authoritarian regimes have implemented around 5 power policies except for lifetime tax exemptions while 106 IPPs have been established.
Official records available to Dawn show that successive governments provided data on tax exemptions to IPPs in economic surveys from 2018 to 2019 but later disclosed the information when the value of tax exemptions increased. Stopped doing it.
Instead, the cost of immunity was lumped in with other sectors to hide it from the public.
According to renowned economist Dr. Hafeez Pasha, the value of these tax exemptions from the mid-1990s to 2018-2017 was one trillion rupees.
He estimated this amount as part of his research on ‘Political Economy of Inequality in Pakistan’.
According to Hafeez Pasha, IPPs are an important example of a favorable pricing mechanism in which electricity tariffs are set in such a way that the government fully covers their capacity charges and fuel costs.
This cost-plus pricing approach has significantly reduced market risk for IPPs due to underutilization of potential capacity, with some enjoying a 25-30 percent return on equity over various years. Has picked up.
This policy paved the way for the establishment of IPPs in the country.
Official sources said that five major IPPs were established till 2002 as a result of power policy after 1988.
4 of these IPPs completed their Power Purchase Agreements and now only one IPP Hub Power Company remains which continues to generate power on the same concession.
A total of 10 new IPPs were set up between 2002 and 2008 during the authoritarian regime of retired General Pervez Musharraf, and another 10 IPPs were set up to generate electricity while receiving tax exemptions during the PPP government from 2008 to 2013. Gone.
The number of IPPs increased significantly during the PML-N government from 2013 to 2018 where a total of 55 new power plants were installed, with an additional 40 under the PTI and PDM governments from 2018 to 2023. PPs were established.
Based on Economic Survey data, it has been reported that the tax exemption for IPPs from 2014 to 2016 was around Rs 51.5 billion.
After that, in 2 years from 2017 to 2019, the tax exemption fell to 18 billion rupees, the government did not justify the reduction in the amount of exemption, in fiscal year 2020 the exemption for IPPs increased to 26.88 billion rupees.
which increased significantly to Rs 47.528 billion in FY 2021. The increase in exemption amount can be attributed to the establishment of more power plants.
Due to the PTI government’s renegotiation of IPPs’ contracts, the exemption limit was reduced to Rs 37.45 billion in FY 2022.
Exemptions reached Rs 56.02 billion in FY 2023 but declined to Rs 30.23 billion in FY 2024.
