KE-KMC contract submitted in SHC

KMC owes Rs1.562b to KE, wants adjustment through tax collection in utility bills

KARACHI:

The Karachi Metropolitan Corporation (KMC) has submitted a contract with K-Electric (KE) for the collection of municipal tax in compliance with the Sindh High Court (SHC) orders. The SHC had issued the order on a slew of petitions challenging the collection of municipal taxes through electricity bills.

The court had directed the KMC on March 28 to produce the contract with K-Electric. Several documents, including a notification issued by the City District Government Karachi (CDGK) on June 16, 2008, and resolutions regarding utility bills and municipal taxes, have been provided alongside the copy of the contract.

According to the contract, the K-Electric is authorised to deduct a portion from the collected amount before transferring the remainder to KMC’s account. Critics have, however, raised concerns about the contract. According to the agreement signed in June 2022, KMC has acknowledged Rs1.562 billion in electricity arrears till July 2022, which will be deducted as per the KE outsource agreement. However, the details of this deduction have not been made public, as they were only presented to the SHC during the hearing of petitions against the provincial government's decision to outsource MUCT recovery to KE.

The agreement stipulates that KMC will collect MUCT from domestic and commercial consumers through their monthly electricity bills, with charges determined by customer category as notified by KMC. K-Electric is mandated to deduct 7.5% of the total monthly collection of MUCT, along with KMC's monthly electricity bills. After deducting these amounts, 50% of the arrears payable by KMC are to be deducted from the remaining collection before transferring the remainder to KMC's account.

The agreement also specifies that K-Electric is not liable for delays in processing MUCT bills and that the collection does not extend to the jurisdiction of cantonments within Karachi. Any inadvertent charging of consumers falling under Cantonment Boards' jurisdiction will be revised at K-Electric's discretion.

The agreement allows K-Electric to terminate the contract with KMC by providing 30 days' prior written notice without assigning any reason.

The SHC will resume hearing in the case on April 24.

During the previous hearing, the court was informed by senior lawyer Munir A Malik that the government must adhere to contract rules and cannot delegate KE to collect MUCT through electricity bills. He argued that even KE cannot exercise coercive powers to recover such taxes under relevant laws.

In 2022, then Jamaat-e-Islami Karachi chief Hafiz Naeem Rehman and others filed separate petitions on this issue. Following the approval of the then chief minister, a notification was issued on January 21, 2022, allowing the KMC to collaborate with KE for MUCT collection under the Sindh Local Government Act (SLGA) 2013.

The petitioners argue that the implementation of MUCT based on a resolution passed by then Karachi administrator (now mayor), Murtaza Wahab, is illegal and lacks legal provision. In September 2022, the SHC issued an interim order restraining K-Electric from collecting MUCT through electricity bills.

Published in The Express Tribune, April 14^th, 2024.