ISLAMABAD - The Economic Coordination Committee (ECC) of the Cabinet on Thursday approved to grant Tax Holiday for the LNG import despite strong opposition from the tax department which opposed to give tax exemptions to Engro’s Elengy Terminal Pakistan Limited (ETPL), importer of LNG.
Sources informed that Federal Board of Revenue (FBR)’s officials were of the view that Engro’s LNG terminal was not entitled to a five-year income tax holiday and a relief in import duties. Therefore, the issue has brought back in ECC that has already approved the policy four years back.
The ECC, which met under the chair of Finance Minister Ishaq Dar, has detailed deliberations on the recommendations put forth by the Ministry of Petroleum and Natural Resources regarding exemption of taxes and duties on Gas Import Pipeline and LNG Project. The ECC discussed treatment of other alternate fuels like diesel, HSFO etc. in this regard.
Chairman Federal Board of Revenue (FBR) opined that all imported fuels were paying requisite taxes. Considering the same it was decided that LNG and imported gas shall be treated like any other imported fuel and taxes as applicable shall be paid.
In the proposal it was also contended that GOP vide its LNG policy had given a 5 year tax holiday to LNG terminal operators and owners under section 113 and section 113-C of the Income Tax Ordinance 2001. FBR opined that Tax Holiday did not include article 113 of the Income Tax Ordinance. After considering input from all the members it was decided that a Tax Holiday should be treated as such and no tax should be levied, therefore the recommendation was approved.
On the point regarding exemption of Customs duty and sales tax on lease of Floating Storage & Regasification Unit (FSRU), the Ministry of P&NR contended that FSRU was a new concept in Pakistan. It received, stored and regasified LNG for onward supply and as such it should be considered as Plant & Machinery of a Floating LNG Terminal.
The committee agreed with this point of view and advised FBR to consider it as plant and machinery in the existing SRO.
On another proposal put forth by the Ministry of Petroleum and Natural Resources on allocation, pricing of LNG and associated matters, the ECC decided that OGRA would determine the price of LNG on monthly basis without going through the process of public hearing. OGRA rules would be accordingly amended.
ECC referred the matter regarding re-allocation of RLNG to Fauji Kabirwala Power Plant by equivalent reduction from KAPCO, allocation to Rousch Power by allocation from Nandipur power plant along with other issues concerning treatment of transportation charges as non-operating income for both the gas companies, to a Committee comprising Finance Secretary, Secretary P&NR, Secretary Water and Power and Member Gas, OGRA for deliberations. In case of disagreement, the Committee would revert to the ECC.
The top economic decisions making body of the country, the ECC, has allowed Fatima Fertilizer Company to raise $300 million from international debt markets and invest as equity in the Midwest Fertilizer Plant in the United States. Fatima Fertilizer, the Arif Habib subsidiary, would issue the seven-year bonds in international markets to raise debt for the initial investment in Midwest Fertilizer.
The State Bank of Pakistan (SBP) would back the bonds. Fatima Fertilizer will have a 35 percent shareholding in Midwest Fertilizer along with management control. The remaining ownership will rest with a consortium of international investors. The plant’s expected production capacity is said to be 2.4 million tons and it will cost $2.4 billion to build.
The ECC allowed extension in deadline for export of sugar (up to 650,000 MT) till 15th July 2015. It may be recalled that the Committee had earlier approved for export of this quantity of sugar by 15th of May.
The Ministry of Commerce in its fresh proposal Thursday stated that due to lengthy procedural requirement for export, contracts only for 323,466 MT could be registered till March 27 2015. The Ministry further pleaded that apparently it would not be possible to export the remaining quantity by May 15, 2015. Accordingly, the ECC allowed extension in the export period.
On a proposal from Ministry of Water and Power, the ECC allowed NTDC to carry out tariff adjustment for Davis Energen Ltd as admissible under Power Purchase Agreement and the 1994 Power Policy. David Energen Pvt. Ltd is a 10.5 MW gas fired power project which was set up under the 1994 Power Policy.
On a proposal from the Ministry of Ports & Shipping, Tax Holiday period for Gwadar Port and the Gwadar Port free zone was extended by ECC from 20-23 years as requested by China Overseas Port Compnay Ltd. (COPC). The Gwadar Port Authority Board in its meeting held on 1st January had recommended that Tax Holiday of 23 years instead of 20 years may be allowed to as described in the Concession agreement in order to attract national and foreign investors and to enhance the overall FDI through Gwadar Port Authority.
The ECC also approved public sharing of Ministry of Petroleum and Natural Resources Monitoring & Evaluation Report by placing it on the Ministry of P&NR website.