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Multan-Sukkur Motorway Rs10 bn tax exemption to Chinese firm ‘irregularity’: Senate body

By Mehtab Haider
March 01, 2018

ISLAMABAD: The Senate Standing Committee on Finance has unanimously declared granting of rupees ten billion tax exemption to a Chinese company for construction of Multan-Sukkur motorway as ‘massive irregularity’.

Some members of the Committee would be retired after completing their tenure next month. Senator Saleem Mandviwalla chaired its meeting here at Parliament House in which no treasury member participated.

Senators belonging to opposition parties including PTI and PPP termed this concealment as part of irregularity and now sought details of list of machinery and materials on which the FBR granted tax exemptions. It also directed the National Highway Authority (NHA) to furnish Memorandum of Understanding (MoU) signed by China and Pakistan’s governments for making this project part of China Pakistan Economic Corridor (CPEC).

“This is unfair deal and the figures of this project are horrible. It shows that how taxpayers’ money is being doled out for ulterior motives. Why two other bidder parties have not been apprised about the tax exemption at time of bidding which means that they were all set to favour one party,” PTI Senator Nauman Wazir and Senator Mohsin Aziz stated.

NHA Chairman Jawad Rafique Malik told the committee that they conducted controlled bidding by invoking rule 5 of Public Procurement Regulatory Authority (PPRA) for awarding contract for construction of Multan-Sukkhar motorway portion. Three Chinese companies participated in the bidding by quoting lowest price to over Rs400 billion. Then the cost was brought down to Rs339 billion.

“We sought technical clarifications and the cost was further reduced by Rs40 billion and slashed down to Rs294 billion,” he said and added that the cost was reduced as the Chinese company had inserted Rs8 billion cost on the possibility of hiking of tax rates in Pakistan and another Rs10 billion because of unavailability of tax exemption and some other factors. He said that the scope of the project was changed to bring down the price of this project to the lowest level.

Senator Nauman Wazir alleged that the approved cost was escalated by 20 percent and brought close to Rs294 billion for awarding to this project to one Chinese company. “It’s illegal to provide Rs10 billion exemption to company by concealing it from other bidders at time of bidding,” he added.

When senators insisted upon NHA chairman and inquired him whether the exemption was offered to all three bidders or only one Chinese company that won bidding, he could not satisfy the senators.

At this point, Senator Nauman Wazir hurled direct allegation and stated that tax exemption was hidden from other contenders for getting benefits. The NHA chairman contradicted him and said that it was wrong attribution made to him that they had committed any wrongdoing. When the Senators continued grilling the Chairman NHA, he offered them to give half an hour so that he could share full details with them. However, the senators had drawn their conclusion by evolving consensus with each other including chairman of Senate panel that they would submit report to House after getting copy of MoU of this project and detailed list of items on which the FBR had granted tax exemptions.

FBR’s Member Inland Revenue (IR) Dr Iqbal told the committee that the FBR issued SRO for granting tax exemptions on machinery and raw materials and summary to this effect was moved by Ministry of Communication to the Economic Coordination Committee (ECC) of the Cabinet.

The summary was moved in December 2015 and SRO also issued in the same month. Later on, representative of Steel Melters Association told the committee that they were being charged in shape of heavy taxes and there was no justification to grant tax exemptions on imported material causing them heavy loss.