Pakistan to extend Saindak lease, tax concessions to Chinese contractors
Feb 09, 2022
Islamabad [Pakistan], February 9 : In order to attract investment to the second phase of the China-Pakistan Economic Corridor (CPEC), the Economic Coordination Committee (ECC) of the Cabinet will take up an 11-point agenda on Wednesday that includes the extension of the lease to Chinese contractors of the Saindak copper-gold project and the revival of tax concessions to Chinese power producers.
Metallurgical Corporation of China (MCC) and state-owned Saindak Metals Ltd (SML) signed an agreement in 2017 under which the Chinese firm kept on operating the Saindak copper-gold project for five years.
The lease is set to expire on October 30. The two companies had originally signed in 2002 a 10-year contract, which was extended for five years in 2012. The terms of contract have been kept confidential all along, reported Dawn.
The deal is believed to involve the provincial government with about 25 per cent of the net profit along with royalties and duties. The terms of contract are often criticised by nationalist leaders for being unfavourable to Balochistan.
The provincial government holds 35 per cent shares in the project while the centre owns 15 per cent. The remaining 50 per cent stakes are held by MCC. Later, the provincial government signed a separate agreement with the MCC-SML consortium that is valid until October 2027 but needs to be covered under a federal arrangement, reported Dawn.
The ECC will also consider a payment plan for public-sector power producers on the pattern of independent power producers (IPPs) as part of revised tariff agreements of 2020.
Sources said the ECC will also take up an alternative plan to protect 7.5 per cent withholding tax (WHT) on the profit to Chinese IPPs under original contracts instead of 25 per cent imposed in the 2019 budget under requirements of the International Monetary Fund (IMF) programme.
The increase in the tax rate on profit from 7.5 per cent to 25 per cent has irked Chinese investors. The Power Division and the CPEC Authority have been making their case for the revival of a 7.5 per cent WHT rate because this was a departure from CPEC commitments.
However, the Ministry of Finance and the Federal Board of Revenue (FBR) have pointed out that a revival of the lower tax rate was not possible because of the IMF conditions, reported Dawn.
Meanwhile, the Pak-China Steering Committee had also called for addressing the issue as the Chinese considered it a unilateral violation of the power purchase agreements on part of Pakistan.
