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ISLAMABAD: Special Assistant to Prime Minister on CEPC Khalid Mansoor has sought support from Federal Board of Revenue (FBR) for re-import of coal transhipment fleet for M/s China Power Hub Generation Company (CPHGC) Private Limited without additional tax or duty.

In a letter to Member Customs (Operations), Mansoor maintained that 1320MW CPHGC imported coal-fired power plant with integrated jetty is one of the largest foreign direct investments of CPEC in Balochistan with an investment of $2 billion.

The project has successfully achieved its COD on Aug 14, 2019. The project provided multiple benefits to Pakistan economy including uninterrupted cost-effective electricity, local direct and indirect employment, millions of dollars to national and provincial exchequer in terms of taxes, etc.

According to SAPM, who is extending fulltime assistance to Chinese investors, the Company has stated that their power plant fully relies on imported coal for which coal is imported on Ocean Going Vessel (OGV) at transhipment area, and then transferred on transhipment vessel, which is permanently anchored at Gadani, (Hub Balochistan) and further transferred to barges and tugboats till the site for power generation.

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In connection with such transhipment facilities, the Company imported CTS fleet which comprises of 1 transhipment vessel, 2 units of barges and 3 units of tugboats for smooth operations of its power generation plant, and the Company paid all applicable taxes and duties at the time of initial import on the said CTS fleet. Now, as per the requirements of Classification Societies and RINA rules, the CTS fleet needs inspection, maintenance and repair at dry-docking facilities which are not available in Pakistan. Hence, the same CTS fleet will have to leave Pakistan from time to time for dry-docking facilities and then re-enter.

The letter states that under the present applicable taxation regime, no exemption is available for the Company on re-import of the same CTS fleet, hence it will be liable for duties and applicable taxes such as re-import, which is clearly not the case here.

According to SAPM on CPEC, under the PCT/HS Code 9918.0000, customs duty is only payable on repair cost of machinery and any additional equipment apparatus, appliances, components sub-components if re-imported after repairs and not on the cost of the vessels since applicable duties in relation to the vessels would have already been paid at the time of initial import.

Mansoor requested to extend necessary support to the company to avoid any interruption in power plant’s operations.

Earlier, CEO of the company also wrote a letter to the concerned authorities including SAPM and sought their help in resolution of the issue of re-import of transhipment for smooth operation of power plant.

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Meanwhile, CPHGC’s CFO has said, the outstanding receivables have remained a significant concern for all CPEC energy projects. As at January 20, 2022 the outstanding receivables of CPHGC stand at Rs 54 billion out of which Rs 41 billion is overdue. A significant amount of billing is currently pending due to the delay in the decision of the one-time tariff adjustment. Currently, an amount in excess of Rs 17 billion is pending to be billed by the Company which includes the effect of non-indexation of tariff components from Commercial Operations Date (COD), i.e., August17, 2019 till June, 2020 due to variation in foreign exchange rate &LIBOR (already billed on reference values & needed to be revised as per the indexation mechanism). The Company in its several correspondences and meeting with the relevant officials have raised the concern of liquidity; however, no significant improvement has been witnessed in this regard.

According to the CFO, owing to such slow recoveries the Company has not been able to declare any dividend to its sponsors. Further, various meetings and correspondences with CPPA-G for allocation of funds have been made in order to draw attention towards the issue of accumulation of such huge debt and company’s requirement of extra funds allocation through various letters especially recent letters.

The company, has emphasized through communications that it has to procure at least around 480,000 tons of coal each month starting from January, 2022 to April, 2022 to meet the full demand of NPCC for energy production at an affordable cost and to cater the restriction on import of coal by NEPRA during monsoon season, i.e., maximum up to 600,000 tons.

NEPRA has allowed CPHGC to import coal on its own jetty, after a proper due diligence and its economic viability survey, through CTS arrangement (where a vessel is permanently stationed in deep sea near CPHGC and coal is unloaded from incoming coal importing vessel to this stationary vessel and then transferred through barges to the jetty) but in monsoon period, import through CTS is not possible due to high tides in the sea and unfavourable weather conditions. Thereof, accordingly NEPRA has allowed import through non-CTS arrangement (where the coal is unloaded on the ports other than the CPHGC-owned jetty and then transferred to coal yard through land transportation) also but has restricted the import of coal through such arrangement maximum up to 600,000 tons against annual requirement of almost 4,000,000 tons. Therefore, the pre-monsoon coal procurement is burdened much to minimize the relatively expensive purchases during monsoon period.

CFO, in its letter has maintained that the issue of immediate requirement of funds is also highlighted by the company’s higher management represented by CEO & Vice President (Legal & Corporate Affairs & Production Development Department) in the meeting held with Secretary Power on January 18, 2022.

CFO maintained that currently, the working capital lines of the Company have already been fully exhausted due to the reasons while payments of fuel suppliers and contractors are still pending.

He has sought Secretary Power Division’s cooperation beyond usual and to intervene with relevant Authorities/ Ministries/ Departments for a resolution of the situation through allocation of maximum funds to CPHGC in order to provide uninterrupted power supply to national grid and to avoid contractual defaults.

Copyright Business Recorder, 2022

Comments

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Ch K A Nye Jan 24, 2022 10:01am
It certainly seems that common sense is increasingly uncommon with the FBR.
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khurram aziz Jan 24, 2022 10:28am
While reading it one gets the idea that Pakistan has been doing nothing right and the poor Chinese company has had a very bad time of it.The agreementd that were signed for power generation were fundamentally flawed.Having said that one can ask have they signed to the new agreements that other plants have? If so they should be given their money.A suggestion at layman level is The Pl-480 program.It meant that repayment was in Pak rupees and the Chinese Government gets the money and pays the investors
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