KARACHI (January 13 2003) : Hub Power Co, trendsetter of the stock market, and other independent power plants, would show gains in their values and would be in the buying chart as the Central Board of Revenue (CBR) has informed them that taxes would be imposed on those plants which would be set up on or after October 22, 2002.
Queries had been raised by the owners of power plants whether the notification was also applicable to oil-fired plants set up prior to October 22, 2002, and time-bound exemption available by virtue of mutual agreements between the Government of Pakistan and IPPs was also affected by this notification.
It has also been stated that the intention of the Power Generation Policy 2002 could not possibly be to withdraw exemption from the existing power plants of this category, an official said.
CBR has clarified that the government is committed to honour the agreements entered into for setting up power project.
Concessions/facilities provided earlier have not been withdrawn.
The policy decision taken on October 22, 2002 is, therefore, prospective in nature and would be applicable to the oil-fired power plants set up on or after October 22, 2002.
On January 2, the stock market was rife with rumours that CBR had decided to levy income tax on the power plants.
Hubco was one of several IPPs set up in 1994 under an agreement that they would not be liable to pay income tax in Pakistan.
The Member Income Tax had been quoted as saying in a leading business daily on December 29 that tax exemption of oil-fired power plants had been taken away from October 22, 2002.
Later, on January 2, Hubco's management conveyed its view on the subject to the Karachi Stock Exchange, saying that the company is not liable to pay income tax in Pakistan, which managed to subside investor fears to an extent as the stock gained Rs 0.85 on January 3.
However, this was only the company's own view as it still awaited clarification from the higher authorities in this regard.
Since the Hubco stock had been in the limelight for the past month and had been driving the KSE-100 Index as well the investors and market players needed clear clarifications from the authorities.
The 2002 Power Policy, which was announced in first quarter of this fiscal year, is aimed at shifting focus from oil-based power generation to other cheaper fuels, such as gas, coal, and hydel.
Therefore, with this shift in focus, the government had decided to provide income tax exemption to new power plants based on these cheaper fuels, while levying income tax on any new oil-based power plants that may be set up.