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Ghazi Barotha hydro power project Ministry seeks duty cut for machinery import

ISLAMABAD: The Ministry of Water and Power has asked the Economic Coordination Committee of the Federal Cabinet to direct the CBR authorities to charge two percent duty on the imported machinery and equipment meant for the Ghazi Barotha hydro power project by its sub-contractors.

The ministry informed the ECC that the Central Board of Revenue had rejected its request for concessionary import duty on equipment imported by the sub-contractors of the project.

Official sources told Fortuna here on Thursday that the Ministry of Water and Power has sent a summary to the ECC to allow this relaxation of duty to its sub-contractors under the SRO 557(I) 97 dated July 28, 1997.

Giving background of this request, sources said the Ministry of Finance and Economic Affairs issued SRO No. 557(I), dated July 29, 1997 envisaging two percent duty on import of machinery, equipment and construction material to be imported by Wapda or its contractors under contract C-03 (civil works of power complex and ancillary works) for Ghazi Barotha hydro power project.

The contract C-03 has been awarded to Dongfang Electric Corporation of China, whereas Va Tech Voet Mec have been nominated by Wapda as sub-contractors for supply and installation of penstocks to Dongfang for this contract. In all hydro power projects like Ghazi Barotha the penstocks are integral part of civil work of the power complex.

Sources said the civil works contract C-03 (including penstocks) was originally envisaged to be financed by the World Bank. However, during review of the cost of C-03 civil works, it was noted that the allocation made by the World Bank for this particular contract was not sufficient to cover the whole cost.

The WB declined to agree to an increase in the already committed allocation of $350 million and instead advised Wapda to de-link some of the components of the contract C-03 civil works in such a way that the rest of the civil works could be accommodated within the Bank's allocated financial package.

Accordingly, penstocks, even though integral part of the civil works, were separated from C-03 civil works. KFW agreed to finance this part with the condition that these should be made a separate sub-contract to facilitate their financial transition. Accordingly this contract was named as sub-contract C-03A.

Sources added during August 1999 when some construction material and equipment, imported by the sub-contractors NA. Tech Voest Mec for C-03A reached Karachi port, the customs authorities refused to give benefit of SRO No. 557(I)97 dated 29.7.97 (envisaging 2 percent duty) to the sub-contractor. However, later on, it was released against an undertaking that Wapda will provide clarification fromÊthe CBR within 90 days.

Accordingly, the matter was taken up with the CBR. It opined that the benefit of SRO 557(I)97 is available only to Wapda or its contractors. Therefore, it cannot be extended further to sub-contractors.

The CBR further opined that extending benefit of the said SRO would require making an amendment by including the word "sub-contractor" at the appropriate place for which the Ministry of Water and Power may seek fresh order from the ECC.

Sources said now the Ministry of Power is of the view that the SRO, which provides that "to be imported by the Wapda or its contractors under the contract C-03", should be applicable to sub-contract C-03A under the main contract C-03.

If it is considered necessary to amend the SRO, the words and sub-contracts may be added in para 1 of the SRO after the words Wapda or its contractors, the ministry has recommended to the ECC. Fortuna