For LNG transport: FBR toughens up, denies tax exemption for import of tugs

PQA wanted waiver; now asked to arrange it through own resources.

ISLAMABAD: Hardening its stance on granting exemptions, the Federal Board of Revenue (FBR) for a change has turned down Port Qasim Authority’s (PQA) request to waive off duties, running into millions of dollars, on the import of tugs specifically meant for the transportation of LNG.

The PQA was looking to import tugs on lease and, given its financially weak position, wanted a waiver on duties.

According to officials close to the development, since the LNG import terminal was developed at Port Qasim by Engro Elengy Terminal Pvt Limited (ETPL), the PQA – under clause 3.14.1 of the Implementation Agreement signed with ETPL – was responsible to develop specific infrastructure including acquiring four specialised tugs for the transport and harbour operation of LNG carriers and the floating storage and re-gasification unit.

The Ministry of Ports and Shipping took up the matter with the Economic Coordination Committee (ECC) for a grant or loan of $60 million for the purchase. However, that request was turned down and the PQA was asked to arrange the tugs through its own resources. Following the order, the PQA arranged tugs through hire for a period of two years.

However, in its meeting on May 21, the ECC was informed that the fleet of PQA tugs was not compatible and it needed to import ASD Tugs — an alternate that proved to be expensive and beyond the reach of PQA since it cost $25 million for a period of two years in addition to the duty estimated at $9 million. Additionally, given the cost of fuel and PQA’s annual expenditure comes to around $20 million.

The Ministry of Ports and Shipping was of the view that clause 7.1 (b) of the LNG policy 2011 envisages fiscal incentives in the form of exemption from taxes and customs duties on import of equipment for the terminal.

While the Ministry of Petroleum endorsed the exemption, the FBR denied the request.

Published in The Express Tribune, May 29^th, 2015.

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