The Awami League government, supported by China and India, secured power for the fourth time in January's one-sided elections. Over the last 15 years, this government has provided various financial benefits to companies in China and India. However, due to the loan conditions imposed by the International Monetary Fund (IMF), the government has had to retract these policy financial benefits it once offered. Despite the government's desire to continue providing these benefits, it has been compelled to withdraw them.

Last week, the Bangladesh-China Power Company (Pvt) Limited (BCPCL), also known as the Payra thermal power plant, applied for an extension of the advance income tax (AIT) deduction on imported coal until June next year. The AIT deduction benefit on imported coal for the Ultra supercritical system power plant is set to expire in June this year. Recently, BCPCL has formally requested an extension of the deadline for AIT deduction on coal from the National Board of Revenue (NBR). This plant, owned by a China-Bangladesh joint venture, comprises two Chinese companies, namely, China National Machinery Import and Export Corporation and China's state-owned China General Technology.

In the preceding year, the National Board of Revenue (NBR) and the electricity department granted various policy and financial benefits to the government for procuring power from the 1600 MW power plant owned by Adani Power Limited in Jharkhand, India. These benefits included special profit-enhancing opportunities through a 25-year contract. Critics at the time called for the revision or cancellation of the Adani contract, deeming it 'against the interest' of the country. Presently, Bangladesh imports approximately 1500 MW of electricity from Adani Power Limited's plant in Jharkhand, India.

Meanwhile, various reforms have been recommended to bolster the revenue of the National Board of Revenue (NBR) following the terms of the IMF's extended loan assistance agreement. The IMF has specifically called for the revocation of NBR's discretionary authority to grant tax holiday benefits. Currently, tax officials at NBR possess the ability to grant tax holiday benefits to any individual or company, a power that the IMF deems should be rescinded.

The IMF contends that only the national parliament should have the authority to grant tax holiday benefits. Although a list specifying which sectors will receive tax holiday benefits in the current budget has been announced, the budget also allows NBR to grant tax holiday benefits to any sector beyond this list at its discretion. However, the IMF argues that this power should not rest with NBR and should instead be vested in the national parliament.

A comprehensive report was submitted by the IMF in the third week of March last year, based on insights gleaned from NBR officials. This report outlines significant reforms necessary in the revenue sector. It not only identifies the reforms needed but also specifies the timeline for their implementation.

In addition, companies in the gas extraction sector currently enjoy a special tax benefit known as the 'Depletion Allowance'. Despite not incurring actual expenditures in this sector, these companies receive tax benefits. However, the IMF suggests that this facility is unnecessary and should be discontinued.

Meanwhile, according to the BCPCL letter, the period of AIT reduction for BCPCL coal imports, which commenced on June 6 last year, is scheduled to conclude in June of this year.

According to the Income Tax Act, if the import of fuel oil and coal amounts to Tk 200,000 or less, no Advance Income Tax (AIT) is required to be paid. However, if the import exceeds Tk 200,000, a 0.60 per cent income tax rate is applicable. Importantly, for fuel oil imports by companies other than petrol-selling companies, the AIT rate is only 1 per cent. Conversely, for refinery companies, this rate increases to 3 per cent for fuel oil imports. Additionally, gas expansion companies face a 3 per cent AIT rate.

An official from the finance department, speaking on condition of anonymity to Bangla Outlook, stated that the government is currently unable to disregard the conditions imposed by the IMF. Consequently, the government has been compelled to cease the facilities provided by the Awami League government over the past 15 years to secure loans. He emphasized that the government perceives no alternative course of action.

Dr Shamsul Alam, an energy expert at CAB, expressed to Bangla Outlook that private power companies in the country are availing themselves of numerous benefits from the National Board of Revenue (NBR) and the power department. These benefits range from exemptions on machinery import duties to charging capacity fees and receiving payments in US dollars. However, he questioned the reciprocal benefits these companies have provided to the people of the country.

Dr Alam also highlighted the burden faced by the consumer council, noting that they are now compelled to pay more than 14 and a half taka per unit on their electricity bills.

As per the proposal, last year's amendment to the Income Tax Act stipulated that income earned from the power generation business of coal-based private power generation companies would be exempt from income tax for the subsequent 15 years from the date of commercial production. Furthermore, following the Income Tax Act, imported coal destined for the power plant owned by such companies is exempt from advance income tax levied at the import stage.

The Payra thermal power project, which obtained environmental clearance in 2016, commenced construction in 2017. Subsequently, on January 12, 2020, the plant initiated electricity generation from its first unit. Prime Minister Sheikh Hasina officially inaugurated this thermal power plant on March 21, 2022. The total project cost amounted to USD 248 million.

Bangladesh-China Renewable Energy Company (Pvt.) Ltd. forms part of China's Belt and Road Initiative (BRI) project. Established on September 1, 2022, it operates as a joint venture between the Bangladesh government-owned Northwest Power Generation Company and China National Machinery Import and Export Corporation, a subsidiary of China's state-owned China General Technology Group.