Tag: Financial Year

  • Electricity tariff for K-Electric consumers increased by Rs4.45 per unit 

    Electricity tariff for K-Electric consumers increased by Rs4.45 per unit 

     
    Residents of Karachi are set to see an increase in their electricity bills, as the National Electric Power Regulatory Authority (Nepra) has recently decided to raise the power tariff by Rs4.45 per unit for consumers of K-Electric (KE).  

    The decision to elevate electricity rates, as outlined in a notification from the Power Division, was made during the initial quarterly adjustment of the preceding fiscal year. 

    Moreover, additional charges from KE consumers will be applied to their October and November 2023 bills, as specified in the notification. 

    Simultaneously, in response to a request from KE, Nepra has granted approval for the inclusion of actual or prudent expenses associated with the temporary operation of Unit-3 of Bin Qasim Power Station (BQPS-I) from May 1 to August 15, 2021, in the cost calculations. 

    Consequently, prior determinations made by the Authority on September 15, 2021, and May 12, 2022, concerning this matter have been adjusted to accommodate this modification. 

    “In view of the foregoing, the Authority hereby decides to accede to the request of KEL [K-Electric Limited] and allows the actual/prudent cost relating to the interim operation of Unit-3 of BQPS-I (from May 1, 2021, to August 15, 2021). Accordingly, the earlier decisions of the Authority (dated September 15, 2021, and May 12, 2022) in this regard stand modified to this extent,” stated the power regulator. 

    However, a member of the authority, Mathar Niaz Rana, expressed in an additional note that under the Multi-Year Tariff (MYT) plan, KE was obligated to have both phases of BQPS-III operational by December 2019, a deadline they failed to meet. 

    Consequently, they resorted to utilising Unit 3 of BQPS-I, resulting in additional fuel expenses. The cost stemming from this inefficiency should not be passed on to consumers. 

    Nepra conducted a public hearing on January 25, 2023, during which KE was given an opportunity to present its case. 

    According to The News, in the hearing, the utility company asserted that they chose to temporarily utilise Unit-3 of BQPS-1 to meet Karachi’s peak summer demand instead of resorting to more costly power generation methods or implementing power outages, all in the best interest of consumers, as per Nepra Act Sections 31(2) and 32(3). 

  • Govt aims to collect extra Rs721 billion from electricity consumers in current fiscal year

    Govt aims to collect extra Rs721 billion from electricity consumers in current fiscal year

    In a significant move to address the mounting circular debt crisis in the energy sector, the government has unveiled a plan to collect an additional Rs721 billion from electricity consumers during the current financial year. The decision comes as a response to the pressing need to reduce the burgeoning circular debt and stabilise the energy sector’s financial health.

    Sources within the Finance Ministry have revealed that the government has informed the International Monetary Fund (IMF) of its comprehensive strategy, which entails a multi-pronged approach to boost revenue and mitigate circular debt. The plan involves a series of phased electricity tariff hikes and adjustments over the coming months.

    According to the proposed timeline, the electricity price will initially be raised by Rs1.25 per unit until September. This adjustment is projected to generate approximately Rs39 billion in additional revenue through quarterly adjustments. This initial step aims to provide a quick injection of funds into the energy sector.

    Following this, from September to December, electricity tariffs are set to witness a further increase of Rs4.37 per unit under the banner of fuel adjustment charges. This particular measure is anticipated to contribute Rs122 billion to the overall revenue pool, providing a substantial boost to the government’s efforts to reduce circular debt.

    Moreover, an ambitious plan to raise the power tariff by Rs5.75 under annual rebasing is on the horizon, with projections suggesting that this move could generate an impressive Rs560 billion in revenue. The cumulative effect of these tariff hikes is expected to bring about a significant reduction in the circular debt that has plagued the energy sector for years.

    The government’s overarching objective is to curtail the circular debt of the power sector, which had skyrocketed to an alarming Rs2,700 billion by June 2023. With the implementation of the proposed tariff adjustments and revenue generation measures, officials are optimistic that the circular debt will be reined in substantially.

    By the end of the current financial year, the government aims to limit the circular debt to Rs2,130 billion, marking a significant milestone in the long-standing battle to stabilise the energy sector’s finances. These measures, though they might impose a temporary burden on electricity consumers, are viewed as critical steps towards achieving a more sustainable and reliable energy infrastructure for the country.

  • Pakistan commits to boost foreign exchange reserves to $11.7 billion by 2024

    Pakistan commits to boost foreign exchange reserves to $11.7 billion by 2024

    Pakistan has made a commitment to the International Monetary Fund (IMF) to significantly increase its gross foreign exchange reserves by $7.65 billion. The goal is to raise the reserves to $11.7 billion by the end of the financial year 2024, up from the current level of $4.056 billion in the financial year 2023. This move is aimed at building a buffer of foreign exchange reserves to protect the national economy from external shocks.

    The assurance was given through a Letter of Intent (LoI) signed by Finance Minister Ishaq Dar and State Bank of Pakistan (SBP) Governor Jameel Ahmed. Under a $3 billion stand-by arrangement (SBA) for nine months, Pakistan assured the IMF and its executive board of its commitment to bolster its foreign exchange reserves.

    If the gross foreign exchange reserves reach $11.7 billion by the end of June 2024, they will be sufficient to meet the country’s import requirements for goods and services for approximately 1.8 months.

    The balance of payment (BoP) chart, agreed upon by the IMF and Pakistan, indicates that projected disbursements of foreign loans during the current financial year 2023-24 are expected to amount to $15.01 billion from multilateral and bilateral creditors. This financial year started on July 1, 2023, and will end on June 30, 2024.

    The analysis of the BoP data suggests that Pakistan needs to secure external financing from multilateral and bilateral creditors during the current fiscal year. Additionally, Pakistan is seeking an additional deposit of $2 billion from the Kingdom of Saudi Arabia and $1 billion from the United Arab Emirates (UAE). The Islamic Development Bank (IsDB) has agreed to provide a $1 billion loan program.

    Furthermore, Pakistan is actively working on program loans and project financing from the World Bank, Asian Development Bank, and Asian Infrastructure Investment Bank (AIIB) to secure a total disbursement of $15 billion from all multilateral and bilateral sources.

    To further strengthen its reserves, Pakistan intends to engage with bilateral partners, especially China, Saudi Arabia, and the UAE, to extend the maturity of their existing deposits, which amount to $2 billion, $3 billion, and approximately $2 billion, respectively, in the current financial year.

    The IMF executive board is scheduled to convene on July 12, 2023, in Washington DC, to review and consider Pakistan’s request for approval of a $3 billion short-term bailout package, including a $1 billion tranche release. Upon approval by the executive board, the $1 billion tranche will be disbursed within a few days.

    The IMF staff has already circulated copies of the Letter of Intent among the executive board members. In this document, Finance Minister Ishaq Dar and the SBP governor have provided assurances regarding the implementation of crucial fiscal and energy reforms to address fiscal challenges. Islamabad has also committed to tackling issues in the energy sector, including measures to control the circular debt problem.

    To address energy sector concerns, the government plans to raise power and gas tariffs in line with the determinations made by the regulators. The National Electric Power Regulatory Authority (NEPRA) will finalise the power tariff, while the facts regarding gas tariffs are being ascertained by relevant officials.

    The Oil and Gas Regulatory Authority (OGRA) has already recommended increasing gas tariffs by 45 per cent and 50 per cent for two major gas utilities. The government has a 40-day timeframe to make a decision on this matter, after which the recommendations will be notified in the second week of July 2023.

    Under the nine-month SBA program, it is anticipated that there will be two reviews conducted by the IMF mission in September and December 2023. Each review is expected to lead to the disbursement of a $1 billion installment.

    Overall, Pakistan is taking significant measures to strengthen its foreign exchange reserves, seek external financing, and implement necessary reforms in order to address its economic challenges and ensure stability.

  • FBR faces Rs75 billion shortfall in annual tax collection target

    FBR faces Rs75 billion shortfall in annual tax collection target

    The Federal Board of Revenue (FBR) is currently confronted with a shortfall of Rs75 billion in attaining the revised annual tax collection target of Rs7,200 billion for the fiscal year.

    Despite collecting Rs7,125 billion, which falls short of the revised target, the FBR faces a net revenue shortfall of Rs75 billion for the fiscal year 2022-2023.

    Originally, the FBR’s annual tax collection target was established at Rs7,640 billion for the outgoing fiscal year, subsequent to the unveiling of the mini-budget in February 2023.

    To generate additional revenue, the government implemented various measures, including an increase in the Goods and Services Tax (GST) rate from 17 per cent to 18 per cent, the application of a higher GST rate of 25 per cent on luxury goods, and a 154 per cent rise in the Federal Excise Duty (FED) on cigarettes.

    However, over the past four months, the FBR failed to generate the anticipated additional revenue, leading to a downward revision of the revenue collection target from Rs7,640 billion to Rs7,200 billion by the end of June 2023.

    Notably, Minister for Finance and Revenues, Ishaq Dar, took to Twitter to highlight the achievement of the highest-ever tax collection for the outgoing fiscal year.

    He stated, FBR has collected Rs7,000 billion in taxes for the first time in the country’s history as of June 26, 2023, and expressed optimism that the revenue collection would further increase by June 30, 2023.

    It is expected that the FBR will issue a formal statement regarding the revenue collection in due course.

  • IMF meetings schedule excludes Pakistan till June 29 amidst pending 9th review

    IMF meetings schedule excludes Pakistan till June 29 amidst pending 9th review

    In a setback for Pakistan, the International Monetary Fund (IMF) Executive Board has excluded the country from its upcoming meetings, raising concerns about the completion of the 9th review under the Extended Fund Facility (EFF) programme. The IMF’s executive board calendar reveals that Pakistan is not on the agenda for the scheduled meetings until June 29, leaving little time to restart the $6.7 billion bailout programme before the end of the current financial year on June 30, 2023.

    Pakistan is currently facing challenges in securing fresh loans to bridge its $6 billion refinancing gap. Despite the impending expiration of the current programme, the Finance Ministry is still striving to reach an agreement with the IMF. However, the lender has raised concerns about Pakistan’s budget for the fiscal year 2023-24, particularly regarding non-tax revenue and the need to broaden the tax base.

    Last week, the IMF questioned the credibility of Pakistan’s budgetary numbers, which has cast a shadow of doubt over the country’s ability to meet the conditions for the bailout programme. In response, the Ministry of Finance issued a press statement on Friday, attempting to address these concerns. However, the statement failed to dissipate the doubts surrounding Pakistan’s economic situation.

    The IMF and Pakistan may now consider combining the pending ninth review with the tenth review in the new fiscal year. Such a move would likely require Pakistan to implement more stringent tax collection measures in exchange for a larger bailout package.

    The delay in completing the 9th review and the exclusion of Pakistan from the upcoming IMF Executive Board meetings have intensified the challenges faced by the country’s economy. As the June 30 deadline approaches, the Pakistani government and the IMF will need to work diligently to resolve their differences and pave the way for the resumption of the bailout programme.

    Pakistan’s ability to secure the IMF’s support is crucial for stabilising its economy, attracting foreign investments, and addressing the refinancing gap. The outcome of the negotiations and the subsequent decisions taken by both parties will have far-reaching implications for Pakistan’s financial stability and economic growth in the coming months.

  • Honda Pakistan records 40 per cent increase in earnings

    Honda Pakistan records 40 per cent increase in earnings

    Honda Atlas Cars Limited (HACL) concluded the financial year with a 40 per cent increase in earnings, giving investors reason to be optimistic. This is despite several challenges including an ongoing chip shortage, rising commodity prices on overseas markets, hefty freight rates, and the rupee’s depreciation.

    “The result is below our expectations, which is mainly due to higher-than-expected distribution costs and effective tax rate,” Ismail Iqbal Securities auto sector analyst Muqeet Naeem stated.

    The automaker benefited from the fact that demand for four-wheelers remained high despite the problems.

    Honda purchasers appear to be unconcerned with price changes, preferring to purchase their preferred vehicles whenever they want, regardless of how much more expensive they are now than they were only two years ago.

    Prices have continued to rise at a rapid pace. There may also be a sense that prices will continue to rise. However, in a market known for “own money” or high premiums, continued demand despite price increases should not be surprising.

    The earnings per unit sold is a great marker of how quickly prices have risen. Honda sold 57 per cent more automobiles in MY22 than the previous year, which ended in March 21.

    The introduction of a new Civic generation considerably attributed to Honda’s sales growth.

    Not only have imports become more expensive as the PKR has depreciated against the greenback, but inflationary pressures on inputs and rising fuel prices have also contributed to cost increases. Revenue and cost per unit sold have generally increased in lockstep.

    As a result, despite strong demand growth, margins have fallen to 5 per cent.

    Other income, which consists of customer advances, has significantly bolstered the company’s profitability. Other income boosted the bottom line by 47 per cent in MY22, compared to 33 per cent the previous year. This also suggests that demand will continue to rise in the coming months.

    However, as lending rates continue to skyrocket, the company may lose demand from purchasers who plan to finance their vehicles through a bank.

  • Pakistan’s exports grew 25% in the last nine months

    Pakistan’s exports increased by 17.3 per cent in March 2021 to $2.773 billion, up from $2.365 billion in March 2021 and 25 per cent in the last nine months.

    The Prime Minister’s Adviser on Commerce and Investment, Abdul Razak Dawood, said that exports increased by 25 per cent to $23.332 billion in the July-March fiscal year 2021-2022, compared to $18.688 billion in the same period last year, implying a $4.644 billion upsurge.

    On the other hand, according to preliminary data from the Pakistan Bureau of Statistics (PBS), exports fell 2 per cent on a month-on-month (MoM) basis to $2.77 billion in March 2022, down from $2.82 billion in February 2022.

    Dawood said in a tweet, “We are glad to share that Pakistan’s exports for Mar-2022 grew by 17.3 per cent to $2.773 billion as compared to $2.365 billion Mar-2021. For Jul-Mar 2022, our exports grew by 25 per cent to $23.332 billion as compared to $18.688 billion in Jul-Mar 2021. This is an increase $4.644 billion”.

    While talking about the target for exports he added that “We expect to achieve our yearly target. The import figures would be shared when finalised by the PBS. We would like to congratulate our exporters for maintaining the momentum of exports under these testing times in the global market”.

    Pakistan’s current account deficit (CAD) decreased by 78.46 per cent to $545 million in February from $2.531 billion in January, owing primarily to a steep drop in imports.

    Read more: FBR records 29.1% growth during July 2021 to March 2022, despite providing ‘massive tax relief’

    Surprisingly, the CAD crossed the $12 billion level in the first eight months of FY22, showing no signs of improvement in the external account. The CAD was only $34 million in February 2021.

  • FBR surpasses target, collects over Rs1tr

    FBR surpasses target, collects over Rs1tr

    The Federal Board of Revenue (FBR) has collected more than Rs1,000 billion in revenue during the first quarter (July-Sept) of the current fiscal year (FY2020-21).

    According to media reports, the tax department has collected Rs1,002 billion during the period under review, against the target of Rs970 billion.

    The tax department had collected Rs593bn during the first two months of FY21, while collection in September stood at Rs408bn, as against the target of Rs418 billion.

    The revenue collection during the quarter increased due to the resumption of economic activities post-COVID lockdowns. The department has also increased its crackdown on defaulters and tax evaders.

    On Wednesday, the FBR’s Directorate of Intelligence and Investigation-Inland Revenue (Lahore) raided the business premises of a shoe manufacturing unit under Section 38 and 40 of the Sales Tax Act, 1990.

    The unit was engaged in manufacturing activities, making taxable supplies of footwear etc while consuming huge amounts of raw materials and electricity. However, the unit had been deliberately filed “nil” sales tax returns since July 2015 to avoid payment of due sales tax.

    During the search, important records were impounded which is under scrutiny while further investigation in this regard is underway. The directorate intends to intensify such operations to detect tax fraud and stop huge revenue leakage being caused to the national exchequer.