Sources say allocation from PSDP will create hindrances for the government, as giving an unprecedented favour to a Chinese contract can lead to similar demands by the rest of the contractors from the same country working on different projects under Chinese loans
In an unprecedented move, the government has approved payment of Rs 4 billion in taxes and duties for the ongoing Rs 11.8 billion Safe City Islamabad Project from the public sector development programme (PSDP) on behalf of the Chinese contractor.
An official source said the approval was given during a meeting of Central Development Working Party (CDWP) on October 29, after it was presented with the directives of the prime minister.
“The orders received from the PM Office directed expediting the process of approval and allocation of Rs 4 billion for payment of taxes and duties through inter or intra sectoral re-appropriation”, the official said.
The project was approved by ECNEC in November 2011 and is under implementation through a $124.9 million Chinese loan sanctioned in 2011. A Chinese contractor company is working on the project and it had to pay the taxes and duties on the import of equipment and machinery. The Ministry of Interior had approached the prime minister for the exemption of taxes and duties.
Allocation from PSDP will create hindrances for the government, as giving an unprecedented favour to a Chinese contract can lead to similar demands by the rest of the contractors from the same country working on different projects under Chinese loans, the source added.
Earlier three options were forwarded to the prime minister regarding the taxes and dues of the project. First option was exemption of taxes and duties on equipment imported for the project, secondly to sanction supplementary grant by the Finance Division to FBR or, lastly, approval of the revised PC-I and allocation of Rs 4 billion by Planning Division for payment to FBR.
The source said that the PM did not approve exemption of taxes and duties as it would have resulted in low tax collection. FBR already is faced with a deficit of Rs 40 billion in the tax collection during the first three months of the current fiscal year. The sanction of supplementary grant was disapproved as it would have invited the ire of the International Monetary Fund (IMF).
The project will strengthen law enforcement agencies by introducing modern monitoring and surveillance system by utilizing state of the art technologies to prevent unauthorized access of vehicles and to closely monitor vehicles coming to the federal capital from other cities.
