Islamabad:
Pakistan has sought the permission of the International Monetary Fund (IMF) to impose a special 1% tax on each taxable product produced in the country, except electricity and medicines, to finance two mega dams of water storage as a solution to deal with the aggression of Indian water.
The decision to impose a new cessation has been taken after the majority of the provincial governments showed reluctance to finance the early completion of the Diamer-Bhasha dam and the Mohmand dam, according to the sources of the Ministry of Resources Water and the Ministry of Finance.
However, the Government was also gathering the opposition of the IMF, which has urged the Federal Government to try to find a space within the approved program of RS1 Billions of federal development of the public sector, the sources revealed.
The Diamer-Bhasha dam with value of RS480 billion and the Mohmand dam, originally estimated to cost RS310 billion, had been approved in 2018, but still a minimum of RS540 billion was needed for its completion.
India has threatened to cut the water supplies after it celebrated the Treaty of the Indo Water (IWT) in suspense in violation of the provisions of the treaty and by breach of international law. Islamabad has clearly told India that any act of this type would be considered as an act of war.
The sources said that, as an alternative strategy, Pakistan has decided to accelerate the construction of the two dams. However, due to its political priorities and pressing demands by the coalition partners, the Government has reduced the development budget of the water sector by 28% to RS133 billion for the next fiscal year. Now he wants to compensate this by presenting a new tax.
The sources said that the Government has decided to raise a 1% cessation on the gross value of all local tax supplies to raise additional funds, subject to the approval of the IMF and Parliament. They said that all goods produced in Pakistan and tax submitted are proposed to charge at a new cessation rate of 1%.
The goods that are currently exempt from the sales tax under the sixth schedule, or are charged at a zero rate under the fifth schedule of the Sales Tax Law would be immune to cessation. Similarly, it is proposed that electricity goods and pharmaceutical goods are exempt from the new cessation.
The CESS is different from a normal tax and can only be collected for a specific purpose, such as the development of gas infrastructure (GIDC) that had been imposed to finance the Iran-Pakistan gas pipe. Indeed, each good produced in Pakistan and consumed by all homes would be subject to a new 1%special tax, the sources said.
The spokesman of the Qumar Abbasi finance ministry and the secretary of the Ministry of Water Resources, Syed Ali Murtaza, did not respond to the request for comments. They have been asked to confirm the development and also the position of the IMF.
A senior official of the Ministry of Finance said the proposal was under consideration, but that the discussions with the IMF were still continuing. He said that Cess would not be imposed through the 2025 finance law, and instead a new bill will be introduced separately in Parliament, subject to the authorization of the IMF.
In the case of Gidc, the Supreme Court has decided that cessation can only be raised for a specific purpose and requires separate legislation. This joins the government’s hands to introduce the cessation through the Finance Law, which is currently discussed in Parliament.
The Gidc case is also an example of how the government is indifferent. Textile and fertilizer companies have not yet deposited more than RS400 billion in the kitten despite collecting those of consumers. Finance and oil ministries cannot make an effective strategy.
One of the options is that, instead of raising a new cessation of 1%, the government should amend the GIDC law and divert the money already collected to build dams.
On the intervention of the Minister of Petroleum, Ai Pervaiz, the Government has again constituted a committee under the presidency of the Minister of Finance, Muhammad Aurengzeb, to recover the GIDC. But this committee is also moving at a rhythm of a snail.
The sources said that the IMF’s opinion was that the government should finance the PSDP dam projects instead of imposing more burden on people.
However, the Ministry of Water Resources has informed the Government that it would take 15 years to complete the Mohmand dam and more than 20 years to finish the work in the Diamer-Bhasha dam to the current rhythm of the budget allocations.
The PSDP is already too stretched and there is no room to finance these projects beyond the assignments made in the new budget, said Ahsan Iqbal, the Federal Minister of Planning and Development. He said that of the assignments of RS1, indeed, RS640 billion was available to finance the PSDP.
IQBAL said the remaining RS360 billion had been assigned to spend on the N-25 Karachi-Quetta road, provincial schemes and special areas assignments.
The sources said that after the meeting of the National Economic Council (NEC) earlier this month, Prime Minister Shehbaz Sharif had also presided over a special meeting with the provinces to convince them that they finance these two dams so that they are occupied with the Indian aggression.
In a monitoring meeting with the Vice Prime Minister Ishaq Dar, the provinces, except Khyber-Pakhtunkhwa, showed reluctance to finance federal projects, the sources said.
The cost of the Diamer-Bhasha dam had been estimated at RS480 billion seven years ago and still needs RS365 billion more to complete the work with a price that probably increases even more. For next fiscal year, only RS25 billion for the project have been assigned, which is even less than this fiscal year.
Similarly, the Mohmand dam was approved at a cost of RS310 billion seven years ago and still requires a minimum of RS173 billion more at the old price. Only RS35.7 billion have been assigned in the new fiscal year.
Earlier this week, Ahsan IQBAL said the government has advanced the completion of both projects in two years and these dams will be completed by 2030. He said that at the end, Pakistan will have 7 million acres of additional water storage capacity.
The two deposits of Pakistan Tarbela and Mangla face storage -related problems due to sedimentation and other technical problems.
The Sindh government has granted a deficit budget for the next fiscal year and also showed a zero balance for the outgoing fiscal year. This has surprised many, since the provincial government had a surplus of cash of RS395 billion until March this year, according to the Fiscal Operations Summary of the Ministry of Finance.
For next fiscal year, Sindh has shown a deficit budget of RS38.5 billion, which defeats the main objective of the IMF to obtain cash surpluses from RS1.4 billion of the four provinces.
