Islamabad February 9 2022: Federal Minister for Finance and Revenue Mr. Shaukat Tarin presided over Economic Coordination Committee (ECC) of the Cabinet, today.
The ECC deferred Power Division’s two summaries on Settlement of Payables to Government Owned Power Plants and Reinstatement of Tax on dividend for investors/shareholders of IPPs.
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ECC take up an alternative plan to protect 7.5 percent withholding tax (WHT) on the profit to Chinese IPPs under original contracts instead of 25 percent imposed in the 2019 budget under requirements of the International Monetary Fund (IMF) programme. The increase in the tax rate on profit from 7.5 percent to 25 percent has irked Chinese investors. The Power Division and the CPEC Authority have been making their case for the revival of a 7.5 percent WHT rate because this was a departure from CPEC commitments.
It entailed an annual revenue impact of about PKR 60 billion while the government had to go for the seventh review of the ongoing loan programme next month.
This could be indirectly sorted out through amendments to the Pak-China Double Taxation Agreement. The Pak-China Steering Committee had also called for addressing the issue as the Chinese considered it a unilateral violation of the power purchase agreements on part of Pakistan.
Dawn reported that the sources said that at the time of the revision in tariff agreements in 2020, the government had committed to payments of PKR 403bn to IPPs and, on the same pattern, about PKR 355bn (as of June 2020) to public-sector plants, including nuclear projects of the Pakistan Atomic Energy Commission (PAEC), hydropower plants of Wapda and LNG plants of the National Power Parks Management Company.
While the payments to four dozen IPPs stood settled in a phased manner, the payables to public-sector plants had gone beyond PKR 450bn by November 2020. The Power Division has now proposed the payment of about PKR 190bn, including through a supplementary grant of about Rs80bn in current year and remaining Rs110bn through subsidy allocations in the next year’s budget, to address liquidity issues of PAEC, Wapda and LNG plants.
Federal Minister for National Food Security and Research Syed Fakhar Imam, Federal Minister for Energy Mr. Hammad Azhar, Federal Minister for Privatization Muhammedmian Soomro, Adviser to the PM on Commerce and Investment Abdul Razak Dawood, Federal Secretaries and senior officers attended the meeting.
