LAHORE: A Chinese company has asked the government to immediately resolve the issue related to adoption of one per cent fixed tax by the Government of Azad Jammu & Kashmir on the offshore procurement contract of the 1,124-megawatt Kohala Hydropower Project and imposition of 17 per cent sales tax on all imports as proposed in the Finance (Supplementary) Bill 2021.

An official source says the government should immediately take up and resolve this issue since it is a major hurdle in the way of launching construction of mega hydropower project agreed to be completed under the China-Pakistan Economic Corridor (CPEC).

“If the issue is not resolved, the Chinese may drop this project from the CPEC’s list of projects,” the official warned while requesting not to be quoted.

According to CTG/CWEI (China Three Gorges / CWE Investment Corporation — a leading Chinese firm, which was incorporated/registered in Pakistan as Kohala Hydro Company (KHC), the project is the largest foreign direct investment of CPEC in AJK with estimated investment of USD 2.5 billion. All the principal documents of the project including the Government of Pakistan (GoP) and AJK implementation agreements, Power Purchase and Water use Agreements have been signed.

The Private Power Infrastructure Board (PPIB) has also issued the Letter of Support (LOS), which is valid till Sept 30, 2022, to the company for execution of the project.

“The GOAJK has not yet adopted the ECC decision of one per cent final and fixed tax on the offshore procurement contract for the Kohala HPP. The issue was recently discussed in the company’s board meeting.

“The board desires that the issue of adoption by the GOAJK of the ECC decision related to one per cent withholding tax on the offshore procurement contract for the project be resolved without any further delay so that the project can move forward,” explains a letter the KHC chief executive officer wrote to the PPIB managing director.

Published in Dawn, January 21st, 2022