ISLAMABAD, Nov 18: The federal government has asked all the provincial governments and the Central Board of Revenue to provide tax exemptions to 12 corporate companies of Wapda or submit reasons for refusal.

Unless the issue is resolved before Dec 31, 2001 as agreed under the World Bank-funded power sector corporatisation and restructuring programme, Pakistan is unlikely to qualify for the $250m loan. Overall project loan co-financed by the World Bank and Asian Development Bank is around $1 billion.

Official sources told Dawn that Secretary Water and Power Mirza Hamid Hassan has recently written to authorities in the provinces and the CBR that tax exemptions available to Wapda were automatically applicable to its breakaway companies.

The secretary has asked them that either they should issue notification for tax exemptions to Wapda’s 12 corporate companies immediately or submit in writing reasons for not doing so before the government takes further course of action.

Sources said that provincial governments had earlier agreed to provide exemptions on provincial taxes provided the Wapda companies sold electricity to their local bodies at domestic rates.

Under the existing tariff, local bodies are charged at rates as high as Rs7 per unit which is even higher than commercial and industrial tariff. Wapda had agreed to charge these bodies at domestic rates and in return provinces agreed to provide exemptions in provincial taxes like stamp duty etc.

Sources in the power ministry, however, said that later Wapda started charging them at SCARP rate which is lower than existing rates for local bodies but higher than domestic rates. This complicated the process of notification for provincial tax exemptions.

On the federal level, CBR and finance ministry took the stand that no new tax exemption could be granted to any sector including the power companies.

The economic coordination committee (ECC) had asked the CBR chairman to have a fresh look into the whole issue and see whether tax exemption could be extended to corporate companies of Wapda. The CBR, however, remained consistent with its views and refused to grant exemption.

The issue became complicated because the government is required under the power sector restructuring programme agreed to with the WB and the ADB to provide tax exemptions to these 12 corporate companies for three years to put them on sound footing.

Under agreements with the IMF, however, the government is barred from providing tax exemptions in any form. The power sector corporatisation and restructuring programme is required to be completed by Dec 31, 2001.