ISLAMABAD: The Khyber Pakhtunkhwa (KP) government has formally requested income tax exemptions for its hydropower projects, aligning them with the incentives currently enjoyed by private sector projects and those in Azad Jammu and Kashmir (AJK).
In a letter to Finance Minister Senator Muhammad Aurangzeb, Brig. (Retd.) Tariq Saddozai, Special Assistant to the KP Chief Minister on Energy and Power, emphasized the province’s vast hydropower potential. He stressed that systematic and transparent development of these resources could ensure long-term national energy security and sustainable economic growth.
The KP government highlighted that it has been funding the construction of hydropower projects through its own resources, contributing significantly to national energy needs and economic stability, as reliable and cost-effective power is critical for sustaining major economic activities.
Currently, under the Income Tax Ordinance 2001, profits from hydropower generation are exempt for private companies (Clause 132, Part I of the Second Schedule) and WAPDA (Clause 66, Part I). Companies operating in AJK and Pakistan also enjoy similar exemptions. However, projects developed by the Pakhtunkhwa Energy Development Organization (PEDO) are excluded, leading to claims of discriminatory treatment.
To rectify this, KP has proposed amendments to the Income Tax Ordinance 2001 to extend exemptions to PEDO and government-formed companies in the province. Specifically, the proposed amendments seek to insert new entries under Clause 66 and Clause 11A, granting PEDO and associated companies income tax relief from their inception.
The provincial government urged the Finance Minister to direct relevant authorities to include these amendments in the Finance Bill 2025-26 for discussion and approval during the National Assembly’s upcoming budget session.
The KP government believes that approving these exemptions will strengthen its ability to develop additional hydropower capacity, ultimately boosting the province’s economic resilience and contributing to Pakistan’s broader energy security.
Story by Mushtaq Ghumman
