Rental power companies will be subject to normal taxation: Minister tells National Assembly

Minister for Water and Power Raja Pervaiz Ashraf informed the National Assembly here on Monday that rental power companies will be subject to normal taxation under the Income Tax Ordinance 2001, which would result in additional revenue for the government of Pakistan.
In a written reply, he told the house during question-hour that the advance payment of Rs 10.510 billion was made by Pakistan Electric Power Company (Private) Limited (PEPCO) to five Rental Power Projects (RPPs). The payment was made in accordance with the terms and conditions of Rental Services Agreement (RSA) against the security of Advance Payment Guarantee from Class-A Scheduled Bank as well as Performance Guarantee.
Breakup revealed that the advance payment of Rs 1,344.924 million has been made to Techno E-Power (Pvt) Ltd,. Sammundari Road, Faisalabad, Rs 723.902 million Pakistan Power Resources, Guddu, Rs 1,259.614 million Young Gen Power Ltd, Satiana Road, Faisalabad; Rs 6,400.000 million to Karkey karandeniz, Elekrik Uretium, Koringi, Karachi and advance payment of Rs 782.000 million has been made to Techno Energy (Pvt) Ltd, Sahuwal, Sialkot.
He said that this advance payment is recoverable from rental bills on commissioning of plants and is a substitution for SBLC's which could not be arranged due to financial constraints and the high fees of banks involved. It is mentioned here that 10-15% Advance Payment in the Contracts for the Project is an established practice all over the world. This was also taken up and accepted as requirement in 2006 when 7% to 14% mobilisation advance and confirmed SBLCs (Stand by letter of Credits) were given by both PPR (Pakistan Power Resources) and the GE (General Electric) Projects.
The tariff bench marks for PEPCO invited rental power proposals, was defined in ECC decision of February 7, 2008. According to that decision, efforts be made that the tariff for Rental Power Plants is in line with the tariff allowed to the IPPs based on similar technology for their first 10 years. ?Further ICB (International Competitive Bidding) was done to get the offer of Tariff (Rental Service Fee per KWh) within the band width defined by ECC.
The tariff is subject to the approval by NEPRA through the respective GENCOs entered into Rental Service Agreements with the lessor. The tariff in respect of PPIB invited Rental Power Projects was also arrived after ICB process and agreed after approval by NEPRA. The rental power companies will be subject to normal taxation under the Income Tax Ordinance 2001 and will be a source of additional revenue to the government of Pakistan, he added.