ISLAMABAD: Ministry of Maritime Affairs (MoMA) is to challenge General Sales Tax (GST) on Channel Development Cess (CDC) charges imposed by Sindh Government, as done by the Civil Aviation Authority (CAA) in a similar case, well informed sources told Business Recorder.
The decision was taken at a recent meeting of Federal Cabinet, when the minutes of the Cabinet Committee on Energy (CCoE) held on March came under discussion for ratification.
During discussion, a member drew attention to the abnormally high port charges of KPT and Port Qasim, which were internationally uncompetitive. The Minister for Maritime Affairs explained that two ports were on long lease contracts and admitted that their rates were on the higher side, however, necessary measures were being taken to rationalize the same.
The Prime Minister desired that details of steps being taken to rationalize port charges and the timeframe for the downward revision be presented to the Cabinet.
Earlier, the CCoE directed Ministry of Maritime Affairs to conduct a detailed study for independent evaluation for an optimally competitive Gross Registered Tonnage (GRT) rate. That rate whatsoever decided, shall however, apply only prospectively and not retrospectively. Ministry of Maritime Affairs/ PQA shall utilize already collected Channel Development Cess (CDC) on the development of port infrastructure, which should start immediately. However, no further Cess collection shall be made till utilization of the available amount.
The SAPM on Revenue suggested that PQA should not charge further cess unless already collected amount was utilized. SAPM on Petroleum ( now removed) drew attention of the House that Government of Sindh was charging GST on collection of CDC whereas Civil Aviation Authority had challenged imposition of a similar tax in the Sindh High Court on the plea that a Provincial Government could not impose any tax on a Federal Entity. He suggested that the Ministry of Maritime Affairs could take necessary action as required under the law. The chair agreed to the proposal and emphasized that irrespective of widening & deepening LNG channel, overall analysis of PQA was inevitable with a purpose to enhance its economic benefits for the country.
A sub-committee comprising of SAPM on Power, Secretary, Maritime Affairs, Secretary, Petroleum Division and Chairman, PQA has also been constituted to look into the financial viability of the channel widening and dredging work. The sub-committee would also present options for financing of the activity including, but not limited to, the option of imposition of Cess on all or some cargoes. Ministry of Maritime Affairs shall examine the case regarding imposition of GST on CDC by the Government of Sindh, with a view to challenging it in the Court of Law, as done by CAA in a similar case.
Petroleum Division stated that Pakistan State Oil (PSO) and Pakistan LNG Limited (I'LL), (State Owned Entities) were importing LNG in the country. PSO started importing LNG in March 2015 on the 1st LNG Terminal (EETPL) at Port Qasim.
As of February 07, 2021, PSO had imported a total of 359 LNG cargoes. PLL also started importing LNG on the second LNG terminal (PGPCL) in 2017 and a total of 136 LNG cargoes have been imported. Port Qasim Authority (PQA) had been receiving port charges for handling importing LNG vessels which were among the most expensive in the region. The main components of the port charges were pilotage, towage and CDC. Pilotage charges were $ 3.706/ GRT and the CDC was charging $ 100,000 per vessel. The total charges per LNG cargo range from $ 600,000 to $ 750,000, which was 300 per cent more than the average of other regional ports. These charges contribute to an approximately Rs 7 per MMBTU increase in the price of LNG. PSO and PLL were of the view that the CDC was collected for the first 200 LNG carriers for channel widening and dredging. PQA communicated that it would continue charging the CDC until the complete recovery of its investment cost. However, the investment/ project cost and update on dredging and widening of the channel was not provided by PQA.
The Cabinet has also directed MoMA that details of steps being taken to rationalize port charges of Port Qasim and KPT, as well as the timeframe for the downward revision, be presented to the Cabinet in its next meeting.
Copyright Business Recorder, 2021
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