Islamabad:
The International Monetary Fund has rejected Pakistan’s proposal to impose 1% of water storage cessation to the goods to build Mega dams and, on the other hand, suggested to increase the 18% standard sales tax rate to finance any extended size of the Federal Development Program.
The development occurred in the middle of an early review in the cost of the Diamer-Basha dam and that needs funds to build a new Chenab dam on the Chenab River, which will require at least additional RS800 billion, according to government sources.
Official sources said that the global lender did not support the proposal to impose the cessation of water storage, that the government wanted to introduce into each taxable product produced in the country, except electricity and medicines. The cessation has been proposed to finance two mega water storage dams and build a new one as a solution to deal with the aggression of Indian water.
The development pushes the government in a tight place, which was willing to increase the tax burden, but only in a way that would ensure that 100% of the collection remains in the Federal Kitter instead of sharing with the provinces.
In the case of cessation, the government will have the complete right of collection, while the sales tax would become part of the Federal Divisible Group.
The Government had sought the IMF permission to impose the new tax after most provincial governments showed the early completion of the Diamer-Bhasha dam and the Mohmand dam. The Government had proposed that the provinces should choose half of the cost of RS716 billion of the Benazir Income Support Program and that the RS358 billion fiscal space will be used to build dams at a faster rate to deal with Indian aggression. The provinces denied.
The spokesman of the Qumar Abbasi finance ministry did not comment on the development.
The sources said the IMF has many objections to the proposal for the cessation of water storage, including legal and governance challenges. They added that the fund was of the opinion that any special tax reduces flexibility in the budget and sales tax can give such flexibility.
In addition, the IMF did not feel comfortable with the idea of giving control of the new cessation to the Water Development Authority and Power (WAPDA), they added.
The IMF had previously asked the Government to finance these dams of the Public Sector Development Program (PSDP) of RS1 billion. But the government was not inclined to obtain more money from the PSDP, which this year focused more on the needs of the coalition partners than having mega strategic projects as national priority.
The sources said the IMF informed Pakistan that if he wanted to obtain more money for developing spending, he may consider increasing the sales tax rate.
The standard sales tax rate is 18%, while the Government also charges an additional sales tax rate of 3% in case a good is sold to an unregistered person.
The previous decision of the government to increase the oil collection rate to give subsidies to electricity and finance a road in Baluchistan has led to an abnormal increase in diesel and gasoline prices since July 1.
The cost of diesel land is RS177.89 per liter and RS168.73 of gasoline per liter, excluding all kinds of margins, impact of depreciation of rupee and taxes. However, after adding these additional costs, the high -speed diesel price is set at RS284.35 and gasoline to RS272.15 per liter.
Seven years ago, the Government had approved the Diamer-Bhasha dam at a cost of RS479 billion and Mohmand in RS310 billion. The sources said that the reviewed estimates suggest that the cost of the Basha Diamer dam can be shot at more than RS1.1 billion, an addition of around RS620 billion. The exact cost will be determined when the Ministry of Planning receives the reviewed documents.
Even against the original cost of RS479 billion, the Government needed RS365 billion more to complete the work. For this fiscal year, only RS25 billion for the Diamer Basha dam, which is even less than the last 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 for the new fiscal year have been assigned.
Similarly, the government plans to build a dam on the Chenab River with a cost of approximately RS220 billion. This requires an additional RS800 billion for the Chenab dam and the Diamer-Basha dam. After adding the remaining financing requirements, the government needs a total of RS1.35 billion for only these three dams.
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.
For this fiscal year, the Government has reduced the development budget of the water sector by 28% to RS133 billion. Now he wants to compensate this by presenting a new tax.
One of the options is that, instead of raising a new cessation of 1% or a GST rate, the government should amend the GIDC law and divert the already collected much more than RS400 billion money to build dams.
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 budget allocations.
Ahsan Iqbal, the Federal Minister of Planning and Development, already ruled out the creation of more space in the PSDP to finance the big projects.
The Government has held meetings this week at the Ministry of Planning and the Prime Minister’s office to finish a strategy to finance other projects, which can be completed and opened by Prime Minister Shehbaz Sharif this year.
