ORDER, 2011


[Gazette of Pakistan, Extraordinary, Part-iI, 11th November, 2011]

S. R. O. 1019(I)/2011.—The following draft of Thermal Energy (Cost Accounting Records) Order, 2011 which is proposed to be made in exercise of powers conferred by clause (E) of sub-section (1) of Section 230 read with Section 246 of the Companies Ordinance, 1984 (XLVII of 1984), and Section 40 (3) of the Securities and Exchange Commission of Pakistan Act, 1997 (XLvII of 1997) is hereby published for the information of all persons likely to be affected thereby and notice is hereby given that the draft will be taken into consideration after thirty days of its publication in the Official Gazette.

Any objection or suggestion which may be received from any person in respect of the said draft before the expiry of the said date will be considered by the Securities and Exchange Commission of Pakistan.

1. Short title, extent, commencement and application.—(1) This Order shall be called the Thermal Energy (Cost Accounting Records) Order, 2011.

(2)        It shall come into force at once.

(3)        This Order shall apply to every company engaged in production, processing and generation of Thermal Energy/Power.

2.         Maintenance of records.—(1) Every company to which this Order applies shall, in respect of each financial year commencing on or after the commencement of this Order, keep cost accounting records, containing, inter-alia, the particulars specified in Schedule I, II and III to this Order.

(2)        The cost accounting records referred to in sub-Paragraph (1) shall be kept in such a way as to make it possible to calculate from the particulars entered thererin the cost of production and cost "of sales of each of the formulation products referred to in sub-Para (3) of Para (1), during a financial year.

(3)        Where a company is manufacturing any other product in addition to those referred to in sub-Para (3) of Para (1), the particulars relating to the utilization of materials, labour and other items of cost in so far as they are applicable to such other product shall not be included in the cost of product referred to in that para.


(4) It shall be the duty of every person referred to in sub-section (7) of Section 230 of the Companies Ordinance, 1984 (XLVII of 1984), to comply with the provisions of sub-Paragraph (1) to (3) in the same manner as they are liable to maintain financial accounts required under Section 230 of the said Ordinance.

3. Penalty.—If a company contravenes the provisions of Paragraph 3 the company and every officer thereof who is in default, including the persons referred to in sub-Paragraphs (4) of Paragraph 2 shall be punishable under sub-section (7) of Section 230 of the companies Ordinance, 1984 (XLVII of 1984).


(See Paragraph 2)


(1)        Direct Material.—

(a)        Following raw/direct materials are considered as prime sources of energy in their respective Electric Power Generation process:

            (a)        Furnace Oil;

            (b)        Diesel Oil;

            (c)        Gas;

            (d)       Coal; and

            (e)        Others (to be specified)

(b)        Adequate records shall be maintained for above material where applicable for receipt, issue and balances both in quantities and values. The basis on which the value of receipt and issue has been calculated shall be indicated clearly in the cost records maintained or if so desired by the company in a separate manual of procedures, if any maintained by the company or in foot-notes or separate explanatory notes to the cost statements for the relevant period. Such basis shall be applied consistently, throughout the relevant period.

(c)        The values shall include all direct charges upto plant site such as excise duty, haulage charges, transport, freight, handling and transit insurance premium incurred for local procurement.

(d)       In case of imported materials/sources of energy such as oils or coal, all import charges, custom duty, port dues, ocean/air freight, inland freight, marine insurance and all other charges leviable and payable at the time of import, shall be shown separately and included to work out the landed cost of oils or coal.

(e)        Where coal is raised from mines owned or taken on lease by the company, separate record showing the cost of raising shall be maintained in such detail as may enable the company to establish proper cost of the above referred material in cost records.

(f)        Adequate records shall be maintained to establish the correct quantities or volume of gas used. For ascertainment of value of gas, all the expenses incurred (all Government dues local or central, and all other expenses necessary to fetch the gas to plant site) for the procurement of gas at plant site, shall be shown separately and included to work out the cost of gas actually consumed during the process.

(g)        Proper records shall be maintained showing the quantity and value of wastage, spoilage, rejection and losses of input material/fuels and consumables stores whether in transit, storage, operations or at any other stage. The method followed for adjusting the above losses as well as income derived from disposal of rejected and waste material including spoilage, if any, in determining the cost of activities shall be indicated in cost records.

(h)        Realizable value of waste or by-product, if any, shall be credited to arrive at the net cost of power produced.

(i)         Records shall be maintained in such detail to enable the company to readily provide data required in the various Cost Statements prescribed in this Order in a verifiable state.

(2)        Lubrication oil consumption in engines and turbines

Adequate records shall be maintained in respect of all receipts, issues and balances, both in quantities and values. Separate record for regular consumption and routine oil change at standard hours of run shall be maintained in the cost statement as prescribed in this Order so that cost and quantities may be verified with standards.

(3)        Consumable stores, small tools, machinery spare parts, etc

(a)        Adequate records shall be maintained to show the receipts, issues and balances, both in quantities and cost of each item of consumable stores, small tools, machinery spares.

(b)        The cost of issue of consumable stores, small tools and machinery spares shall be charged to the relevant heads of accounts such as repairs to plant and machinery or repairs to building. Material consumed on capital works such as addition to buildings, plant and machinery and other assets shall be shown under the relevant capital heads and not in the cost statements of thermal power.

(c)        Wastage of any consumable stores whether in transit, storage or in any other plant activity shall be quantified and shown separately. Method of dealing with such losses in costing shall also be indicated in the cost records.


(a)        The inventories shall be measured at the lower of cost and net realisable value. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale. The cost of inventories shall comprise all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition.

(b)        It shall also be disclosed that the cost of inventories shall be assigned by using the first-in, first-out (FIFO) or weighted average cost formula. An entity shall use the same cost formula for all inventories having a similar nature and use to the entity. For inventories with a different nature or use, different cost formulas may be justified. However, the cost of inventories of items that are not ordinarily interchangeable and goods or services produced and segregated for specific projects shall be assigned by using specific identification of their individual costs.


(a)        Adequate records shall be maintained to show the attendance of workers employed by the company whether on regular, temporary or on contract basis, as the case may be.

(b)        Adequate record shall be maintained in respect of payments made for over time in such manner that labour cost is available for each cost center.

(c)        Proper record shall be maintained in respect of earnings of all the employees, function or activity-wise, and the works on which they are employed. The record shall also indicate the following separately for each such function or activity.—

            (i)         Direct wages and salaries

                        •           Regular salaries/wages

                        •           Contract salaries/wages

                        •           Piece rate wages

            (ii)        Indirect salaries and wages

                        •           Incentives

                        •           Bonuses

                        •           Scheme based earnings

                        •           Overtime

                        •           Gratuity or statutory dues

(d)       Fair and reasonable allocation shall be made for wages paid to such labour as has been utilized in various departments or cost centers and the basis of such allocation shall be followed constantly.

(e)        Reasons for idle time or layoff payments shall be recorded separately and their treatment in the calculations of cost of power produced/generated shall be indicated in the cost statements.

(f)        Any wages paid for addition to plant and machinery or other fixed assets shall be capitalized and excluded from the cost of power produced/generated.

(g)        Benefits paid to the employees other than covered in above Paragraphs shall be worked out separately and shown in cost statements, department-wise or cost center wise.


Adequate records shall be maintained showing expenses incurred for each service department e.g. workshop, laboratory, transport and testing house etc. These expenses shall be apportioned to other cost centers including service departments on an equitable basis. Where these service departments serve other departments such as steam department or furnace oil handling department, suitable basis shall be worked out so that the apportionment to other departments or to saleable products, is duly worked out and applied consistently.


(a)        Adequate records shall be maintained showing the quantity and cost of various utilities consumed and utilized by different departments and cost centers.

(b)        Records shall be maintained to enable the assessment of consumption or utilization by service departments. Allocation of cost shall be made on the basis of actual consumption or on basis of technical estimates in the absence of actual measurement.

(c)        Details shall be available to determine the actual consumption by the power house. The cost of power consumed by the company shall be shown separately in cost statements.

(d)       Appropriate records shall be maintained of pumping, storage and distribution of water to determine the actual cost of water used by the different cost centers e.g. cooling towers, purifiers and by other service departments. Basis of allocating the cost of water amongst the different cost centers shall also be indicated in the records.

(e)        Adequate records of cost of compressed air shall be maintained. The allocation of cost of compressed air to different departments shall be indicated in the cost records.


(a)        Adequate records of expenditure incurred on workshop facilities provided for repair and maintenance of plant and machinery in cost centers shall be maintained.

(b)        Record of repair and maintenance contracts shall be maintained separately. The basis of allocation of repairs and maintenance to different cost centers shall be indicated in the cost records. Cost of work of capital nature and/or of heavy repairs and overhauls, benefits of which are likely to spread over a longer period, shall be capitalized.

(c)        If a separate team is working for the maintenance of a particular cost centre, the salaries/wages and cost of consumables, spare parts and tools shall be charged as direct expense of that cost centre.

(d)       If maintenance services are utilized by other saleable items like waste, heat energy, the portion utilized for them should be segregated und charged thereto.


(a)        Adequate records shall be maintained showing values and other particulars of fixed assets in respect of which depreciation is to be provided. The record shall inter-alia indicate the cost of, accumulated depreciation, rate of depreciation and the amount of depreciation charged for the relevant period.

(b)        The basis on which the depreciation is calculated and allocated to various cost centers and product(s) shall be indicated in the records.


(a)        Adequate records shall be maintained showing the insurance premium paid for the various risks covered for the assets and other interests of the company.

(b)        Insurance costs shall be allocated to different cost centers and methods allocating such cost shall be indicated in the cost records.


Adequate records including technical agreements shall be maintained party wise in respect of fee paid to the collaborators or technology suppliers on recurring or non-recurring basis.


(a)        Adequate records showing the expenditure incurred as power generation overheads, other than those specified, shall be maintained and method of allocation to different cost centers shall be stated in the cost records/ statements for the relevant period.

(b)        If other saleable products like steam are produced, suitable basis shall be adopted to apportion the cost equitably.


(a)        Power distribution shall be considered a separate line of activity in power sector. Adequate record shall be maintained for the expenditure incurred on distribution lines, gauging installations, repair and maintenance and extension of distribution network.

(b)        Record shall be maintained for all those expenses which are incurred on activities that can be reasonably and fairly be attributed to distribution services.


Adequate record shall be maintained to evaluate the cost of line losses as distribution expenses and it would be clearly indicated whether these are normal or abnormal losses these would be allocated to different cost centers and justification for allocation would be given. In case of abnormal losses these would be separately disclosed. Where line losses exceed the normal limits the reasons shall also be disclosed in the cost records.


Adequate record shall be maintained and kept for research and development separately and proper basis shall be established for charging to different cost centers and saleable products.


Administration overheads shall be recorded separately and proper basis shall be established for charging to different cost centers and saleable products.


(a)        Where a company maintains records on the basis other than actual cost, such as standard costing, the record shall indicate the procedure followed by the company to work out the actual cost of power produced under such system. The method followed for adjusting the cost variances in determining the actual cost of the power produced as well as the reasons for variances shall be indicated in the cost records.

(b)        The reasons for variances in material, labour, overheads cost and sales should be disclosed separately while preparing the reconciliation of profit arrived.


Cost statements shall be prepared by the power generating companies regularly on quarterly basis and on the basis of reviews made on those cost statements, corrective action taken shall be stated alongwith reasons.


(a)        The companies shall develop appropriate standards for use as basis to evaluate performance alongwith standards set by the NEPRA and other Government and regulatory authorities.

(b)        Adequate record of generation and hours run shall be maintained engine wise and generation shall be recorded so as to make available information for the compilation of the cost records.


(a)        The cost records shall be reconciled with the financial accounts to ensure accuracy if integrated accounts are not maintained. Variations, if any, shall be clearly indicated and explained.

(b)        The reconciliation shall be done in such a manner that the profitability of the different products, as per cost statements, is correctly judged and reconciled with the overall profits of the company from all of its activities.

(c)        Adequate cost records shall be maintained in a manner that the cost statements can be compiled.


Wherever possible corresponding figures for the previous year shall be arranged, grouped and provided in cost statements.


1.         General Information

            (a)        Name of the company

            (b)        Registered office address of the company

2.         Corporate Information

            (a)        Status of the company whether public limited (listed or non-listed), private limited or Single Member Company.

            (b)        Company's financial year for which audit is being conducted.

            (c)        Date of Board of Director's meeting where Cost Statements were approved.

            (d)       Name, qualification and designation of the officer heading the cost accounting section.

3.         Technical Information

            (a)        Location of plant Site

                        •           Location of plant site

                        •           Location of mines, if any

            (b)        Capacity of Power Generation

                        •           Installed capacity.

                        •           Licensed capacity.

                        •           Utilized capacity

                        •           Normal capacity

            (c)        Date of commencement of commercial production

            (d)       Type of Project, (IPP/WAPDA subsidiary/other)

            (e)        Type of raw/direct material used for producing power

4.         Detail of distribution network

            a.         Local arrangements

            b.         Export

            c.         Sale to WAPDA and other distribution companies

            d.         Sale at bulk to other customers (to be specified)

5.         Tariff

            (a)        Period of application

            (b)        Notification No. and date approving the tariff

            (c)        Other important features of tariff approved

6.         Applicability of Tax laws

            (a)        Application of tax laws

            (b)        Any exemption available from excise and other levies.

7.         Cost Accounting System

            (a)        Brief description of the system

            (b)        Major accounting policies

See the Schedules III and Annexure in Gazette of Pakistan at pp. 4166 to 4179.