The federal government on Friday approved tax exemptions worth Rs20 billion to Punjab government’s pet multibillion-dollar Lahore Orange Line Metro Train Project.

The development took place in a meeting of the Economic Coordination Committee (ECC) of the Cabinet chaired by Finance Minister Ishaq Dar in Islamabad.

In a bid to restrict the cost of Orange Line metro train project to $1.6 billion, the Punjab government had sought Rs20 billion or roughly $195 million as tax exemptions, while citing a similar preferential treatment that is available for the China Pakistan Economic Corridor (CPEC) projects.

The provincial government sought reduction in withholding tax payments and complete exemptions from sales tax and customs duty.

The bulk of the exemptions are on account of indirect taxes and the federal tax authorities have estimated their value close to $195 million or Rs20 billion.

According to a statement issued by ministry of finance, Finance Minister Ishaq Dar chaired the ECC meeting at the Prime Minister’s Office.

The ECC approved the proposal of the Planning, Development and Reform Division at the request of Punjab government to grant exemptions from withholding tax beyond 6% of E&M contract price, and from tax/duties on import of equipment to be installed for the Lahore Orange Line Metro Train Project.

The decision was taken by the Economic Coordination Committee of the Cabinet after the government withdrew FBR’s powers to issue statutory regulatory orders under a condition of the International Monetary Fund.

The committee also decided that a similar dispensation would also be extended to the other rail based mass transit projects in Karachi, Peshawar and Quetta at the appropriate time.

The ECC was apprised that the Lahore Orange Line Metro Train Project has been made a part of the CPEC along with rail based mass transit projects in other provincial capitals at the recently concluded 6th Joint Cooperation Committee meeting held in Beijing, China.