20000202

BoI-CBR tussle

may cause Rs 20m

loss to country

ISLAMABAD: Pakistan faces the threat of losing investment of over Rs 20 million because of refusal by the Central Board of Revenue to honour a commitment made by the Board of Investment.

The victim of the total lack of coordination between the two government departments, Unigel Capsules, is sitting tight over the machinery and material it imported more than five years ago.

What may finally come out for Unigel Capsules may be a threat that it would take its plant and machinery along with the capital to the neighbouring India.

The firm which imported the machinery and material for setting up a pharmaceutical industry in 1995, has now threatened the government to export the machinery and material lying at Karachi Port to India if the promised duty incentives are not allowed by the CBR.

It is learnt that this case has been brought to the notice of the Economic Coordination Committee (ECC) of the Cabinet by the Ministry of Health.

The ministry has intimated to the ECC that the government should allow special duty exemption on material and machinery imported by Unigel Capsules to avoid the untoward consequence of the firm taking away its investment to India.

"The concerned firms has communicated to the ministry that if the required exemption was not allowed, it would export the machinery to India and, consequently, Pakistan will suffer," the ministry has warned the ECC.

The ministry in its summary has said that the Board of Investment (BoI) in May 1995 had announced certain incentives to encourage manufacturing of pharmaceutical raw material in the country to promote self-reliance.

It said a new project of Unigel Capsules Private Limited, Karachi, was approved by the ministry in March 1995 for the manufacturing of hard gelatin capsules. For this purpose, the firm imported machinery and equipment against LC dated 2-10-95 and invoice No. 6187 dated 18-4-96 with the understanding that it would be allowed the relief of 10 percent customs duty as was announced by the BoI.

Total value of the machinery was to be Rs. 170.246 million while customs duty, regulatory duty, and sales tax and income tax on machinery import had been calculated at Rs. 140.806 million.

The ministry said that National Tariff Commission had also recommended that special exemption be allowed to the firm for the release of the machinery and equipment at 10 percent customs duty, with retrospective effect.

The incentive given by BoI among others including the import of machinery and equipment, not manufactured locally at the rate of 10 percent duty only. This concession was permissible under SRO 506 (I)94 dated 9-6-94 subject to the condition that the raw material to be manufactured was included in SRO 349(I) 85 dated 15-4-85 meant for import of pharmaceutical raw material at concessionary duty rate.

The item hard gelatin capsule, an essential pharmaceutical raw material being used for producing a wide range of registered capsulated drugs, was deleted from SRO 349(I) 85 dated 15-4-85, meant for import of pharmaceutical raw material at concessionary duty rates, for granting tariff protection to an earlier project of MS Gelcaps Pakistan Limited, Hub, Balochistan.

Thus, by virtue of this deletion, which meant merely on grant protection to an already established unit, a situation of monopoly was created which in any case was not the intention of the said deletion, the ministry said.

However, the ministry said that since hard gelatin had been deleted from the SRO 349(I) 85, they were debarred from the benefit of SRO 506(I) 94.

The ministry said it wrote to the CBR on a number of times to offset effects of omission of the item from the SRO, as the objective of this omission was to grant tariff protection and not to create monopoly. But, the whole process took a long time and finally SRO dated 17-1-98 resolved the matter by allowing import of such machinery and equipment at 10 percent customs duty, de-linking it from SRO (I) 85.

The ministry said the firm approached the prime minister Nawaz Sharif, with the threat that in case the concession was not granted, it would consider to export the machinery to India, or any other country. The prime minister's office referred the case to the finance minister saying that the matter may be settled with the stipulation that no loss should come to the national exchequer and also the machinery is not exported to India or any other country.

But, the ministry has regretted in its summary to the ECC that uptil now this vital issue remains unresolved and it could result in heavy loss to the country if the investor decided to give practical shape to its threat to export this machinery to India.ÑFortuna