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Fenchuganj Power Plant

Govt seeks China help to get Harbin going

The Chinese company sitting idle for 18 months as tax dispute with PDB unsettled

Sharier Khan
As the last resort for a friendly solution, Bangladesh government has sought intervention of the Chinese government to make a Chinese company, Harbin, complete and handover the 90 megawatt three-unit Fenchuganj Power Project that has been remaining idle for more than 18 months following a dispute over payment of taxes, said a top PDB source.
In accordance with the government rule, the Power Development Board (PDB) last year deducted 4.5 million US
dollars as payment of taxes to the National Board of Revenue (NBR) from the 83 million dollar power project.
Harbin claimed the contract was tax-free.
Clause 55.01 (b) of the contract signed in September 2005 says, "The contractor shall pay all income tax, super tax, corporate tax, VAT, and all other taxes of similar nature on income earned in Bangladesh arising out of both foreign and local cur. rency portions of the contract price, which shall be deducted at the source as per the existing rule of the government."
NBR scrutinised Harbin's claim and decided that it has no validity.
"NBR clearly told Harbin that it would have to pay the taxes,” said the top PDB source adding, "The government is convinced that PDB's deduction of tax was rightfully done, and Harbin cannot give usanyexcuse."
Harbin in September-October last year tested two units of the plant and generated up to 70 mwof power.
It has been following a go-slow policy since 2007 soon after PDB informed the
SEE PAGE 15 COL 6 FROM PAGE 16 company that taxes would be deducted from the payables to the company. It however now has the third unit installed too, but has been refraining from launching the power plant, while hammering on its demand fortax exemption.
Frustrated by Harbin's noncooperation, PDB issued several notices primarily warning it of cancellation of the contract for its failures, and setting the primary ground for contract termination. The power ministry meanwhile sought legal opinions and sat with Harbin over the issue.
"We hope we will not have to cancel the contract and die Chinese government would help us resolve the matter amicably," said the source adding. "The foreign ministry formally wrote to the Chinese embassy to intervene."
Using the influence of nowdefunct alternative centre of political power, Hawa Bhaban, during the four-party alliance rule, Harbin won PDB's contracts forTongi 80 MW peaking power project, Fenchuganj 90 MW project, and Chandpur 150 MW power project, while con troversies surrounded the process of awarding the projects to the Chinese company.
The Tongi plant came into operation in 2005, but tripped more than 100 times in its two years of guaranteed operation. The Chandpur project was cancelled last year when Harbin demanded 10 percent increase in die project budget, which the government declined.
Regarding the Tongi project, it was later found that while Harbin won the project by quoting low prices, after getting the award the company took a few extra million dollars from PDB by drawing up an additional budget.
Tender were invited for the Fenchuganj scheme five times, each of which were cancelled under pressure from vested interest lobby that failed to bag the deal.
During the fourth bid, a Japanese company Sumitomo offered to do the job with the lowest cost of 85 million dollars, but that was cancelled without any good reason.
Through the fifth tender invitation Harbin was awarded the job in 2005. On top of that Harbin was given a 10 percent down payment in violation of government rules.
However. Harbin's problems emerged sppn .after, the yH change in the country s political scenario in 2007.
The local agent of Harbin along with some others filed an extortion case against Giasuddin Al Mamun, a friend of BNP Senior Secretary General Tarique Rahman who is also a son of former prime minister Khaleda Zia, saying they tookTk 5 crore for awarding the Tongi power project to Harbin during the four-party alliance rule.
Meanwhile, the caretaker government that came to power through the regime change, probed into the Chandpur power project, against which also there had been allegations of foul play by another competing Chinese bidder, and which were found to be true by a committee of the planning ministry.
Amid such a complex scenario, Harbin made its claim of tax-free power projects, saying no power project contractor had ever paid such taxes.
PDB however already paid more than 60 million dollars to Harbin for the three units of 90 mwFenchuganj plant.