ISLAMABAD, June 25: The government is likely to miss June 30, 2003 deadline for legal transfer of Wapda assets and liabilities to 12-corporate companies and grant of tax exemptions to these companies for three years under the revised financial improvement plan (FIP) agreed with the IMF.

The government is now seeking extension in this deadline till December 2003, sources said.

The extension would also enable the National Electric Power Regulatory Authority (Nepra) to announce separate tariffs for all the 12-corporate companies before January 1, 2004, which would become effective from July 1, 2004.

A senior Wapda official told Dawn on telephone from Lahore that the transfer of assets and liabilities of residual Wapda to 12-corporate companies was not possible unless lenders approved repayment schedule of loans, which was still awaited.

Regarding tax exemption, he said, Wapda and the Central Board of Revenue (CBR) were locked in dispute over the date of granting exemptions to 12-corporate companies for three years.

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 (FIP) to complete legal transfer of assets and liabilities to corporate entities with the approval of the lenders and put in place three year exemption of income tax and capital value tax to these entities by June 30, 2003.

However, all the 12-corporate companies, including eight distribution companies (Discos), three generation companies (Gencos) and National Transmission and Dispatch Company (NTDC), have filed their respective separate tariff petitions with the National Electric Power Regulatory Authority (Nepra).

The official said that loans and assets of the Wapda have been identified and would be transferred to the entities once the government received lender’s approval for such legal transfer.

The official said total Wapda liabilities (loans payable to foreign and local lenders) have been estimated at Rs126 billion while total Wapda assets have been put at around Rs400 billion. He said now there would be no need for re-valuation of Wapda assets because these would be transferred to companies on their book value.

“So it is very favourable situation where assets are far higher, more than 300 per cent, than Rs126 billion liabilities, said the official. Wapda’s water wing assets and liabilities are not included in these estimates.

Of the total liabilities, around Rs90 billion worth of loans have been identified as transferable to 12-corporate entities. This require approval from nine foreign lenders and as many local lenders including the federal government itself.

The repayment schedule of these loans and the mode of repayment have been approved by the federal government and the economic affairs division had written letter to all the lenders in February this year but response is still awaited.

Currently, the Wapda shares are in the name of the President of Pakistan and chairman of the umbrella organization Pakistan Electric Power Company has the powers to use proxy vote on behalf of the government of Pakistan.

Once the lenders’ approval received, these shares and titles of ownership would stand transferred to 12-corporate companies for all legal, operational and financial independence.

Officials in the power ministry said that exemptions from all provincial taxes on Wapda companies has been obtained but a major hurdle has emerged due to different interpretation by tax officials on the date of tax exemptions.

These officials said that under the original reforms programme approved by the federal cabinet, the 12-corporate entities were exempt from all federal and provincial taxes for three years after corporatization.

The power ministry and Wapda contend this three-year exemptions starts with the completion of corporatization plan, i.e. with effect from legal transfer of assets and liabilities, which is still to come.

However, CBR authorities interpret that corporatization plans stood completed with registration of these companies with the Securities and Exchange Commission of Pakistan (SECP) and issuance of licences to these companies which has completed two years back. Under this interpretation, the corporate entities should start paying turnover tax to the tune of Rs3-4 billion every year from now on and then income tax in case these companies go into profit.

The power ministry official said legal advice was being sought from the law ministry on the request of Wapda to end this imbroglio.