950821

Duty, tax exemptions on

hydel power equipment being

withdrawn

NASIRA ZUBERI

ISLAMABAD: Contrary to its policy for promoting power generation projects in the country, the government has decided to waive the exemptions regarding Customs duty and sales tax on machinery & equipments imported for hydel power projects.

The step is not only against the policy to facelitate power generation companies but also clashes with the package of incentives provided in the hydel power policy under which the investors are assured of exemption of the same nature as offered to the thermal power generation companies in the private sector.

The step has been taken through an amended SRO No. 416(1)/95 dated May 28, 1995.

It is to be noted here that the country has a huge potential of 50,000 MW of power which needs only initial investment to be exploited. Moreover, the long run hydel power proves much cheaper than the thermal power. The hydel policy announced in April this year like the thermal power, provided several incentives and an attractive package of incentive for the private sector.

It is to be noted here that at the time of announcement of hydel policy, the World Bank had sought draft of the policy before the approval of Cabinet. The World Bank has expressed its concern over the issuance of new letters of support for as letter of support for 7300 MW had alreay been signed for thermal plants whereas the shortage is of 400-500 MW only. But surprisingly enough the government is emphasizing on thermal power instead of hydel.

According to the original SRO No. 279(1)/94, dated April 2, 1994, in which the aforesaid amendment has been made, the government had announced "the machinery and equipment not manufactured locally shall be exempt from the whole of the customs duty and sales tax if imported for setting up of power generation i.e. oil, gas, hydel, coal, wind and wave energy projects." Now with the amendment the word hydel has been removed.

In the second week of last month the government in a surprise move had withdrawn sales tax exemptions on power plants altogether.

Earlier through an amendment the words "not produced locally" has already been omitted again contrary to its policy to protect the local industry.

To add insult to the injuries of local industries another change has been made in the aforesaid SRO under which construction material along with machinery and equipment has been exempted of customs duty & sales tax regardless of the matter whether produced locally or not. The construction material include in itself cement, bricks, wiring, etc.

The step, according to the concerned sources is going to hit the local manufacturers severely who are already passing through a very tough phase.