ISLAMABAD: The Power Division has reportedly not responded to the Khyber Pakhtunkhwa (KP) government’s summary regarding the opposition to at-source deductions, despite five months have been passed, well-informed sources told Business Recorder.
The provincial government aims to bring the issue of at-source deductions of Rs. 3.426 billion for electricity arrears before the Council of Common Interests (CCI), a national-level body tasked with resolving inter-provincial disputes.
In its summary, the KP government argued that the Finance Ministry had made an at-source deduction of Rs. 3.426 billion for outstanding electricity bills of provincial departments for the periods July 2021 to December 2021 and April 2023 to December 2023. This deduction, the provincial government claims, violates a decision made by the CCI in its meeting held on February 14, 2014. The CCI’s decision states:
Electricity arrears: KP to move CCI against deductions at source by MoF
“The CCI considered the proposed procedure explained by the Minister for Finance, after consultations with provincial government representatives, especially from Sindh. It was agreed that at-source deductions for electricity charges related to provincial government departments would be made at a rate of 25 percent of the bill amount.
However, reconciliation between the concerned Power Distribution Company and the relevant government department must take place within 60 days. If reconciliation is not achieved, no further deductions will occur until the issue is resolved.“
The KP government contends that this at-source deduction contradicts the spirit of the CCI’s decision, which was agreed upon by all stakeholders. It adds, “This sudden action by the Finance Division goes against the spirit of the CCI decision, which did not mention adjusting un reconciled liabilities through unilateral at-source deductions.”
The provincial government has acknowledged its heavy dependence on federal transfers for its due share in various accounts. It also faces a significant shortfall in Net Hydel Profit (NHP) arrears and its share from the National Finance Commission’s divisible pool. As such, withholding Rs. 3.426 billion through at-source deductions could further exacerbate the province’s financial instability.
The KP government requested that no further deductions be made from the divisible pool share without prior consent from the provincial government. The reconciliation process with PESCO over the Rs. 3.426 billion dispute is currently ongoing.
Given the CCI’s earlier decision, the KP government moved a summary to the Chief Minister of Khyber Pakhtunkhwa for approval to bring the issue before the Council of Common Interests once again, seeking to halt further at-source deductions. The provincial government decided to consult other provinces, as required under the CCI’s Rules of Procedure, before submitting the matter for final approval.
In a recent communication with the CCI Secretariat, the KP government requested comments in line with Rule-10 (Schedule-II, Sub-rule-05) of the Rules of Procedure of the CCI 2010, but these comments are still pending.
The provincial government’s Inter-Provincial Coordination Department has urged the relevant federal ministries to expedite their responses, allowing the department to move forward with the issue.
Copyright Business Recorder, 2025
