K-Electric has applied to the National Electric Power Regulatory Authority (NEPRA) for approval to shift the burden of bad debts and write-offs to its consumers through tariff adjustment.
K-Electric (KE) aims to make up for its Rs. 7.5 billion of bad debts through this measure, a national daily reported on Friday. In its annual report for the year that ended June 30, 2020, KE reported bad debts and write-offs valuing Rs. 7.49 billion, receivable from more than 70,000 consumers.
However, this may lead KE to face taxation issues, experts told the media. According to the Federal Board of Revenue (FBR) rules, bad debts are not allowed to be written off as expenses under the tax laws and are not admissible in the tax assessment either. According to news reports, the tax authorities had already rejected KE’s attempts of writing off bad debts last year.
KE’s Board of Directors approved the amount of bad debts to be written-off and certified that the company made all possible efforts to recover the amount before filing for this regulatory approval. The statutory auditors of the company also verified that the amount of bad debts in concern are not recoverable irrespective of the company’s efforts.
However, the company’s official statement while filing for approval said that if any written-off amount is recovered in the future, it will be adjusted in the next year’s tariff.