KP declares Federal ED decision unconstitutional

July 22, 2025 (MLN): The Khyber Pakhtunkhwa (KP) government has formally objected to the federal government’s decision to discontinue the collection of Electricity Duty (ED) through electricity bills, terming it unconstitutional, legally void, and a threat to federal-provincial harmony.

In a strongly worded response to a letter from Federal Minister for Power Sardar Awais Ahmad Khan Leghari (dated June 30, 2025), KP Chief Minister Ali Amin Gandapur expressed serious concerns over what he called a “unilateral administrative decision” made without prior consultation or approval from the Council of Common Interests (CCI).

Gandapur emphasized that the power to levy electricity duty lies with the provincial governments under Article 157(2)(b) of the Constitution.

He further cited Section 13(2) of the KP Finance Act, 1964, which mandates that distribution companies must collect and remit the duty to the provincial exchequer as a first charge on electricity bills, legally classifying it as a debt owed to the KP government.

Additionally, under Rule 5(1) of the West Pakistan Electricity Duty Rules, 1964, distribution companies are obligated to display and collect ED as a separate line item on consumer bills.

The chief minister underscored that KP’s authority over metering, billing, and electricity consumption charges is also supported under Section 38 of the NEPRA Act, 1997.

Furthermore, Section 36(2) of the State-Owned Enterprises Act, 2023, protects all previous regulations, thereby maintaining the validity of the KP Finance Act and Electricity Duty Rules.

Citing Articles 268 and 279 of the Constitution, Gandapur stressed that existing laws, particularly those related to taxation, remain in effect until formally amended or repealed by the relevant legislature.

He also highlighted Article 154(1), which vests the CCI with policy control over electricity matters.

The absence of consultation with provinces, he said, violates this constitutional process.

Gandapur noted that three distribution companies, PESCO, HAZECO, and TESCO—operate within KP's territorial boundaries and must adhere to the legal principle of lex situs, which requires compliance with provincial laws governing operations in a specific location.

“The Electricity Duty is not a general tax that can be collected through other means,” the letter stated.

“Only distribution licensees have the infrastructure and legal mandate to recover this duty, and the law does not offer any alternate recovery method outside electricity billing.”

Terming the Power Division’s decision “null and void ab initio,” Gandapur warned that such unilateral steps could provoke unnecessary tensions between the federal and provincial governments.

He urged the federal authorities to reconsider the move and engage in dialogue based on constitutional principles, cooperative federalism, and fiscal stability.

The KP government reiterated its openness to reform discussions—but only within the bounds of constitutional authority and provincial rights.

Earlier, Sindh also rejected the federal plan, with Chief Minister Murad Ali Shah criticizing the federal government for bypassing provincial input and asserting that Islamabad should first manage its own affairs before dictating to the provinces.

Power Minister Awais Leghari, meanwhile, has committed to presenting all provincial responses to the prime minister before finalizing a decision.

Currently, distribution companies collect an estimated Rs60 billion annually in ED for provincial governments.

While the federal government claims the policy change would benefit consumers, provinces insist it violates their lawful fiscal rights.

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