When classification matters

Country's first ever deal on a Public-Private Partnership (PPP) project for setting two haemodialysis centres in the country is expected to be signed between an Indian Pharmaceutical company and the Directorate of Health Services sometime this month.
But an infrastructure project---the much-discussed Mayor Hanif Flyover running between Gulistan and Jatrabari points of Dhaka city---that was opened to traffic on October 11 last year, reportedly, will be receiving the income tax exemption benefit for 15 years as a 'PPP' project.
The builder of the project, the Orion Infrastructure Limited, will not be required to pay any tax on its income from the flyover for next 15 years. The National Board of Revenue (NBR) took a decision to this effect Sunday last.
The NBR, according to a newspaper report, through a notification issued on December 19 last year had also allowed the builder of the flyover project to import vehicles up to 3500 cc capacity (luxurious ones) without payment of any duty. The company will continue to enjoy the facility reportedly for 20 years.
But is the Orion lawfully entitled to the tax benefits offered to it?
The Orion has been claiming the tax breaks showing the flyover as a PPP project. But it is officially not recognised as a project of that variety. The PPP Office on its website has posted a long list of PPP projects. But the name of the flyover project is not there.
Moreover, the government through a gazette notification on August 02, 2010 had published the policy and strategy for PPP. Besides, when the deal between the Belhasa-Accom and Associates was signed in 2005, there was no mention of it as a PPP project. The DCC and the Belhasa signed a 'concession' agreement only.
There is no denying some government leaders had talked about PPP while inaugurating the flyover project in 2010. The website of the Orion Infrastructure Ltd, which earlier used to be known as Accom Engineering, refers the flyover as a PPP project.
In fact the then Dhaka City Corporation (DCC) signed a deal with a joint venture firm named Belhasa- Accom and Associates to build the flyover under Build-Own- Operate and Transfer (BOOT) arrangement.  The very nature of the Mayor Hanif flyover project and its implementation process do not match with those of PPP projects.
The implementation of a project by a private company under BOOT arrangement does not necessarily make it a PPP project.
Moreover, any PPP project, according to the relevant policy guideline, is supposed to be examined, monitored and approved by a number of committees and organisations, including Public-Private Partnership Advisory Council (PPPAC), Cabinet Committee on Economic Affairs (CCEA), and Office for Public-Private Partnership, Line Ministry/implementing agency, Finance Division and Planning Commission. The flyover has not gone through this process.
It remains a mystery as to how the builder of the flyover project is being offered the fiscal benefits under policy guidelines put into effect at least five years after the deal struck between the DCC and the successful bidders.  
While explaining the 'concept of PPP' the government's PPP policy guideline says, "PPP is a win-win relationship between the government and various private sector players for the purpose of delivering a service by sharing the risks and rewards of the venture under contractual agreements".
But in the case of Mayor Hanif Flyover the rewards are being enjoyed solely by the Orion Infrastructures Ltd. and the implementing agency, the DCC, now the DSCC, is getting nothing from the money earned as tolls.
In fact, a lot of unpalatable developments took place since April 05 2003 when the then government had taken decision to build the Gulistan-Jatrabari Flyover.
When the DCC had floated bids for the project, a joint venture, formed by the UAE-based Belhasa Engineering and Construction Company and ACCom Engineering, a sister concern of the Orion Group, dropped bid jointly under a joint venture named the Belhasa Accom and Associates Ltd. and got the contract.  There were delays in starting the implementation of the project. The caretaker administration in 2007 scrapped the deal signed between the DCC and the joint venture.
But in July 10 the UAE-based Belasis filed a case with a Dhaka court accusing the Accom of fraudulent activities.  None knows for sure the fate of the case.
However, the Accom changed its name later as Orion Infrastructures Ltd. and, reportedly, got the government order to implement the project.  
The NBR, reportedly, was not willing to offer the tax exemption facilities to the builder of the flyover. But it could not hold on to its ground, allegedly, because of the pressure from powerful quarters.
In the meanwhile, the very purpose of building the flyover is being met only partially because of the levying of tolls at rates far more than what were agreed upon in the original contract. Most buses and other vehicles avoid the flyover to save money. The traffic congestion on Gulistan-Jatrabari route is less now than before. But the situation would have been even better had the toll rates been reasonable.  

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