ISLAMABAD: The Economic Coordination Committee (ECC) of the Cabinet under chairmanship of Finance Minister Ishaq Dar on Friday accorded approval to slash down prices of imported urea up to Rs1000 per bag and granted tax exemption to Japanese loan of $26 million for the Islamabad – Burhan Transmission Line Reinforcement Project.
The Economic Coordination Committee (ECC) considered and approved proposals submitted by different ministries, in its meeting held on Friday, chaired by Finance Minister Senator Mohammad Ishaq Dar.
The ECC approved the proposal of Economic Affairs Division (EAD) for grant of exemption to Japan International Cooperation Agency (JICA) from all levies and taxes for the loan extended by the Government of Japan / JICA on concessionary terms, amounting to JPY 2.665 billion (equivalent to US $26 million approximately), for the Islamabad – Burhan Transmission Line Reinforcement Project. The main objective of the project is to improve the reliability of the national grid and to meet the growing demand for electricity transmission through reinforcement of transmission lines necessary for power supply to Islamabad Capital Territory and surrounding areas, thereby contributing to the improvement of economic infrastructure of Pakistan.
The ECC was told that Japan has agreed to extend a yen loan amounting to 26 million approximately through Japan International Cooperation Agency (RCA) on concessionary terms with an interest rate of Japanese Yen LIBOR plus 10bp, repayable over a period of 30-years including a grace period of 10-years with general untied procurement conditions for "Islamabad-Burhan Line Transmission Reinforcement Project (Phase-1)" under Official Development Assistance (ODA) upon the request of the government of Pakistan.
The main objective of the project is to improve the reliability of the national grid and to meet the growing demand for electricity transmission through reinforcement of transmission lines necessary for power supply to Islamabad Capital Territory and surrounding areas, thereby contributing to the improvement of economic infrastructure of Pakistan.
The draft loan agreement received from JICA has already been cleared by Finance Division. However, the Exchange of Note contains Clause 7 which stipulates that "The government of Pakistan shall exempt Japan International Cooperation Agency (JICA) from all fiscal levies and taxes imposed in the Islamic Republic of Pakistan on and/or in connection with the loan as well as interest accruing and the same note was forwarded to Federal Board of Revenue (FBR) for concurrence.
A meeting was also held in FBR and the issue of exemption was discussed in detail. FBR has informed that the Board's powers to grant special exemptions under Customs Act, 1969 have been withdrawn vide Finance Act 2015. However, with the approval of the Economic Coordination Committee (ECC) of the Cabinet, the Federal Government is empowered to grant exemption to RCA from income tax in connection with the loan as well as interest accruing thereof, under sub-section (2) of section 53 of the Income Tax Ordinance, 2001. Federal Board of Revenue, in the said meeting concurred to the exemption sought, subject to the approval of the ECC of the Cabinet. Similar provisions exist in section 13 of Sales Tax Act, 1990 and Section 19 of the Customs Act 1969.
As government of Japan/JICA has extended the subject loan on concessionary terms, it is therefore proposed that JICA may be exempted from all levies and taxes in terms of sub-section (21 of section 53 of the Income Tax Ordinance, 2001, section 13 of Sales Tax Act and section 19 of the Customs Act 1969.
The ECC also considered and approved the draft standard Power Purchase Agreement (PPA), proposed by the Ministry of Water & Power, which will be used as standard template for future PPAs. The draft PPA is a tripartite agreement between Central Power Purchasing Agency, Guarantee Ltd (CPPA) on behalf of ex-Wapda Distribution Companies, National Transmission and Dispatch Company Limited (NTDCL) and the Power Producers.
The ECC approved the proposal of Ministry of Water & Power for GoP guarantee for repayment of loan amount of US $140 million, i.e. 40% of US $350 million loan amount for the Dasu Hydropower Project. The World Bank will provide guarantee for the remaining US $210 million loan amount.
The ECC also considered and approved the request of the Ministry of Industries & Production to reduce the price of imported Urea fertilizer lying with National Fertilizer Marketing Limited (NFML) to Rs1000/- per 50 kg bag in the interest of the public for disposal during kharif 2017.
