Differences on tax discount, grant for hydroprojects

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    KATHMANDU, Aug 21

    taxTop government officials and lawmakers are against giving discount on income tax and grant to promoters of export-oriented projects. The majority of parliamentarians, government secretaries and governor of the Nepal Rastra Bank (NRB) speaking during the meeting of the Agriculture and Energy Committee stated that promoters of export-oriented projects, Upper Karnali and Arun III, should not be provided income tax discount and grant of Rs 5 million per MW, and suggested that the facilities should only be provided to projects to be made for domestic consumption.

    The government through the budget for the current fiscal year has announced full waiver of income tax for 10 years and 50 percent discount for the next five years, and grant of Rs 5 million per MW for hydropower projects to address energy crisis in the country. The government will have to provide grant of Rs 9 billion to the projects with installed capacity of 900 MW each apart from the income tax discount. NRB Governor Yubaraj Khaitwada said the facilities should be provided only to the projects developed for domestic consumption. Former vice chairman of the National Planning Commission (NPC) Khatiwada is also the member of the high-level committee to study project development agreement (PDA). He revealed the high-level committee is holding discussions on the issue of tax discount and grant. Secretary at the Prime Minister’s Office Sri Ranjan Lakoul also concurred. Stating that the government has made the provision of tax discount and grant to address the extreme load-shedding he added, “Such facilities should not be provided to export-oriented projects.”

    He also stated that the PDA should mention clearly about receiving 108 MW of free energy from Upper Karnali. “There should be separate dedicated power house and transmission line for that. There is also no clarity about the exchangeable currency. The PDA should make this clear,” he demanded. Energy Secretary Rajendra Kishor Chhetri stressed that Nepal cannot discriminate between domestic and foreign investors as she has already become member of the World Trade Organization (WTO) while Joint Secretary at the Finance Ministry Baikuntha Aryal said there is lack of clarity about whether the facilities should be provided for export-oriented projects. Vice Chairman of NPC Dr Govinda Raj Pokharel said that preparations are on to submit the report of Upper Karnali to the government by Saturday.

    Constituent Assembly (CA) Member Ananda Pokharel also argued that the facilities should not be provided for export-oriented projects and advised to ensure 10 percent shares to the locals affected by Upper Karnali. The government is preparing to distribute two percent shares to the locals. There is already an agreement in place to provide 108 MW of free energy from the project and 27 percent free equity to the government. Another CA Member Prakash Sharan Mahat also opined that we should rethink about the matter as providing grant to Upper Karnali alone will increase liability by Rs 4.50 billion. He also advised to do financial analysis of the project through independent experts instead of depending solely on promoter of Upper Karnali GMR.

    Chief Executive Officer (CEO) of the Investment Board (IB) Radhes Pant assured that the PDA will be signed in Nepal’s interest and stated that PDA is necessary as financial arrangements can be made only after signing it. CA members Laxmi Pokharel, Kiran Yadav, Sudhir Shiwakoti, Gagan Thapa, Khagaraj Adhikari and others also advised to rethink on the issue of tax discount and grant.

    Instruction to determine tax

    The Agriculture and Energy Committee of the parliament has directed the government to sign PDA within the stipulated time by deciding about whether to provide tax discount and grant to Upper Karnali. The meeting of the committee chaired by CA Member Gyanendra Bahadur Karki has recommended the government to pay attention to ensuring supply of electricity by projecting long-term demand. It has also asked to sign PDA by ensuring security of locals, shares to them and their resettlement.

    Regulating dam cannot be constructed

    A regulating dam to control flow of water in Upper Karnali Project cannot be constructed as license for 330 MW Karnali-7 Project has been awarded 4.5-kilometer downstream to Lanco Infratech Limited of India, according to coordinator of the high-level technical committee and NPC vice chairman Pokharel. Experts have called for construction of a regulating dam to control flow of water stating that blocking of water for up to 18 hours a day and releasing the accumulated water for six hours during the dry season can affect region downstream.

    Source : Karobar Daily