ISLAMABAD, July 2: A row between Wapda and the Central Board of Revenue over tax exemptions to 12 corporate entities of Wapda has become a hurdle in the corporatization programme that was required to be completed by June 30, 2003.
The dispute also puts an additional burden of Rs3 billion on Wapda which is already facing difficulties in reducing its fiscal deficit.
Official sources told Dawn on Wednesday that the federal government was considering two options to resolve the issue. Either it will seek a ruling from the law ministry on the interpretation of the date on which the tax exemptions become effective, or take the dispute to the Economic Coordination Committee (ECC) of the cabinet for a decision.
Under the corporatization programme agreed to with the World Bank in early 1990s, the ECC had granted a three-year exemption to 12 corporate companies of Wapda from federal and provincial taxes.
While all the provinces issued notifications to grant tax exemptions, the CBR had resisted the move. It said tax exemptions granted by the ECC became effective from 1999 when these companies were registered under the Companies Ordinance of 1984. Under that definition, the three-year tax exemption period has been completed.
Wapda, however, contended that this exemption should come into force when assets and liabilities of Wapda were legally transferred to these corporate companies. Under this interpretation, the tax exemption should be applicable with effect from December 2003 when assets and liabilities would be transferred to these entities.
Official sources confirmed the World Bank agreed with the government’s request that the deadline of June 30 for transfer of assets and liabilities to corporate entities should be extended up to December 2003, given the fact that it required lenders’ approval and was being delayed due to lengthy procedures.
Wapda sources said petitions of all the 12 corporate entities for separate tariffs have been submitted to the National Electric Power Regulatory Authority (Nepra) well before the target date of June 30, 2003.
Nepra is required to fix separate tariffs for distribution companies, generation companies and national transmission and dispatch company by December 2003, and new tariffs would be applicable with effect of July 1, 2004.
The federal government has committed, as part of $1.47 billion Poverty Reduction and Growth Facility (PRGF), with the IMF under the revised financial improvement to complete legal transfer of assets and liabilities to corporate entities with the approval of the lenders and put in place a three-year exemption of income tax and capital value tax to these entities by June 30, 2003.
The sources said Wapda’s total liabilities (loans payable to foreign and local lenders) have been estimated at Rs126 billion, while its total assets have been put at around Rs400 billion according to their book value.
