Federal govt plans to offer 20-year tax holiday

Islamabad: The Federal Government has decided to offer over 20 years tax holiday to attract private sector investment in building power houses worth billions of dollars on the proposed five big dams.

Private sector would be offered investment opportunities on Public-Private Partnership on Build Operate and Transfer (BOT) basis, said a source.

Formal announcement of tax holiday package is expected in the budget 2008-09. The investors would be exempted from income tax and are also expected to get exemptions from taxes and duties on their imports for the said power-houses, the source added.

According to the initial estimates for the construction of five big dams, government needs $22 billion immediately. Multilateral financial institutions have already expressed their inability to finance such mega projects alone and had suggested the government of Pakistan to allow private sector to help government in this regard.

Diamer Basha Dam project would enable the country to generate 4,500MW, Kaklabagh Dam project could generate 3,600MW electricity. Munda Dam project to facilitate hydel power generation of 6,00MW, Kurram Tangi Dam project would generate 83MW and Akhori Dam project would also add 600MW electricity in the country.

Official sources informed that the task force on five big dams has evaluated the options for the participation of private sector in the construction of dams. The task force was of the view that private sector would be willing to invest in power generation option and would make available much needed finances for the expensive power houses. Other construction tasks like land acquisition, resettlement, environmental issues and other physical construction, which is always problematic, should be left with the public sector, the sources added.

According to the sources the private sector, especially the local as well as foreign Independent Power producers (IPPs), have already confirmed their participation in such mega projects.

Sources said that the task force has already decided to establish Special Purpose Vehicles (SPVs) companies to manage finances and implement the projects on their own instead of Water and Power Development Authority (WAPDA).

All the documentation and legal formalities for the construction of Diamer Basha dam are almost complete and construction t is expected to start June 2008. Before this Ministry of Finance would formally establish a company to run the affairs of construction of this dam.

Public-Private partnership is the most successful model for development of infrastructure in the world economic.