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ISLAMABAD, March 6: The Economic Coordination Committee of the Cabinet decided on Wednesday to make the Karachi Circular Railway project financially viable by exempting its foreign and local components from general sales tax, customs duty and other federal levies.

The project has been on the agenda of the ministry of railways for years and a feasibility study has been conducted with the help of Japan International Cooperation Agency (JICA) which has agreed to finance the project.

After getting the assurance of financial help, the ministry of railways decided to accelerate work on the project and moved a summary to the ECC seeking exemption from general sales tax and customs duty for the loan components of the project.

The $2.6 billion KCR project aims to provide modern rail-based commuter service in Karachi. The ECC was informed that the Japan International Cooperation Agency would provide $2.4 billion loan at 0.2 per cent mark-up payable in 40 years, including 10 years’ grace period.

The ECC meeting chaired by Finance Minister Senator Saleem H. Mandviwalla also approved inland freight subsidy of Rs1.75 per kilogram for 1.2 million tons of sugar earlier allowed for export.

The ECC could not take up all items on its agenda and decided to meet again on Friday to take up important issues in the petroleum and natural gas sector. Officials said that a proposal to enhance deemed duty on the high speed diesel (HSD) from 7.5 per cent to 9 per cent on domestic production as well as bundling of two gas utilities into one countrywide transmission company would be taken up at the Friday meeting.

The committee was informed that since the pace of sugar export was slow and the industry was facing difficulties in paying dues to farmers because of liquidity problems, inland freight subsidy of Rs1.75 per kilogram might be extended to the export of the entire quantity of 1.2 million tons of sugar instead of 0.895 million tons allowed earlier for export.