The Federal Board of Revenue (FBR), the top federal government body in Pakistan that investigates taxation, has proposed to increase the tax on power usage for steel entities again.
In July 2017, the FBR amended rules through SRO 583(I) 2017 regarding payment of enhanced rates of sales tax by the steel industry. The FBR enhanced the rate of sales tax to 10.5 percent from 9 percent on consumption of each unit of electricity consumed to produce steel products. Another 1-1.5 percent is under discussion now.
Domestic sources report to SteelOrbis that the strategy is meant to both increase revenue on the part of the agency but also manage power costs as the country faces accelerated growth. Other revenue-generating activities in 2017 include Pakistan customs increasing the valuation of imported steel product by up to 10 percent.
In August 2017, the gap between supply and peak demand fell to about 12 percent of output according to Arif Habib, a research firm--the lowest in years.
Much of the new power in Pakistan comes from private coal-fired plants like Sahiwal, built by Chinese firms as part of a $38 billion investment in the power sector under a joint development scheme called the China-Pakistan Economic Corridor (CPEC). Coal-fired power previously accounted for less than 1 percent of generation in Pakistan, compared with over 70 percent in neighboring China and India. Sources comment that the high costs of imported coal and natural gas to supply the new facilities, along with poor distribution, are still a challenge. A representative from a steel company estimated that inefficiency and theft has resulted in the loss of 18-20 percent of the power generated and acknowledges that additional taxes increase final productions costs.