The Water and Power Development Authority (Wapda) has sought exemption from customs duty on payments from USAID reimbursement under Fixed Amount Reimbursement Agreement (Fara), sources in FBR told Business Recorder. FARA financing is a form of USAID project assistance under which the amount of reimbursement is set in advance, based upon cost estimates approved by USAID.
Fara mechanism allows the host government to be reimbursed by USAID for successful completion of specified activities in accordance with previously agreed upon specifications or standards. The amount of reimbursement is fixed in advance, based upon reasonable cost estimates reviewed and approved by USAID. USAID has successfully employed the FARA mechanism in an array of projects world-wide. They are most appropriate for low-cost, short-term projects (generally two years or less), or projects which can be made divisible into segments small enough to enable the completion of subprojects or qualified elements of work within the project.
The criteria, among others, include host country taxes which are elaborated in the following way: "the contract must contain a clause that applies the exemption of USAID funds from identifiable taxes of the host country and its political sub-division". All the criteria set under Fara will be met by Wapda except the condition of exemption of tax and duty.
Sources said that initiation and accomplishment of projects, especially relating to water and electricity, are the dire need of the time. Wapda is making all-out efforts to manage and overcome the scarcity in both fields but its limitations, among others, include lack of finances.
According to sources, Wapda believes that under this situation a lot of benefit may be availed from Fara, which necessitates abiding by the pre-requisites as laid down therein. It may be added that income of Wapda is exempted from tax and withholding tax certificates for Fara have already been obtained. "Wapda has requested FBR to extend exemption from customs duty in the payment for the projects covered under Fara in the best national interest," sources said. It is not known how many projects Wapda is executing under the Fara USAID mechanism.
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