Electricity distribution companies (DISCOs) are seeking increase in power tariffs after a recent court decision has made them liable for minimum tax.

The Lahore High Court recently ruled that Tariff Differential Subsidy should be considered part of the DISCOs turnover which would make it liable to minimum tax.

Lahore Electric Supply Compnay’s CEO has now written a letter to the power division asking for help to resolve the matter fairly so the companies do not face additional burden forcing them to raise tariffs.

“We understand the challenges faced by the government in balancing fiscal responsibilities, but we believe that a fair and just resolution is crucial to maintaining the financial stability of Discos and avoiding any adverse impact on tariff,” said the CEO LESCO.

The Federal Board of Revenue had reached an agreement with the DISCOs in 2008 which allowed them to deduct the purchase price of electricity from their turnover for the purpose of minimum tax.

This meant that the DISCOs would have to pay tax on distribution margin instead of total electricity sold.

However, the DISCOS used a tax provision to argue that exclusion of Tariff Differential Subsidy from their turnover showed the companies in a loss, thus exempting from the tax.

If the tariff subsidy is added to the turnover, the companies would be exposed to massive taxes which would inevitably be passed on to the consumers.

However, the companies are already incurring massive losses and power tariffs are at an all-time high so the the issue of raising tariffs might not be straightforward.