Circular No. 97/2008/TT-BTC dated October 28, 2008 of the Ministry of Finance guiding the implementation of the state's support policies for electricity development investment in rural and mountainous areas and islands

CIRCULAR

GUIDING THE IMPLEMENTATION OF THE STATE'S SUPPORT POLICIES FOR ELECTRICITY DEVELOPMENT INVESTMENT IN RURAL AND MOUNTAINOUS AREAS AND ISLANDS

Pursuant to the December 3, 2004 Electricity Law; and the Government's Decree No. 105/2005/ND-CP of August 17, 2005, detailing and guiding the implementation of a number of articles of the Electricity Law;

Pursuant to the November 29, 2005 Investment Law; and the Government's Decree No. 108/2006/ND-CP of September 22, 2006, detailing and guiding the implementation of a number of articles of the Investment Law;

Pursuant to the Government's Decree No. 60/2003/ND-CP of June 6, 2003, detailing and guiding the implementation of the State Budget Law;

Pursuant to the Government's Decree No. 78/2002/ND-CP of October 4, 2002, on credit loans for the poor and other policy beneficiaries;

Pursuant to the Government's Decree No. 151/2006/ND-CP of December 20, 2006, on the State's investment credit and export credit;

Pursuant to the Government's Decree No. 106/2008/ND-CP of September 19, 2008, amending

and supplementing a number of articles of the Government's Decree No. 151/ 2006/ND-CP of December 20, 2006, on the State's investment credit and export credit;

After consulting the Industry and Trade Ministry, the Finance Ministry guides the implementation of the State's support policies for electricity development investment in rural and mountainous areas and islands as follows:

I. GENERAL PROVISIONS

1. Scope of regulation

This Circular guides the implementation of Article 61 of the Electricity Law on the State's support policies for electricity development investment in areas in which electricity investment and activities would bring about no economic benefits; and for building power transmission lines from electricity meters to electricity-consuming places of households that are social policy beneficiaries and meet with exceptional difficulties in rural or mountainous areas or islands,.specifically as follows:

- Supports in investment capital: Provision of investment capital supports.

- Supports in investment loan interest rates: Provision of investment loans and post-investment supports.

- Tax incentives.

2. Subjects of application

2.1. Enterprises and economic organizations which invest in electricity projects in localities with difficult or exceptionally difficult socio- economic conditions, including:

Investment projects on power stations or power plants (excluding investment projects on building small-sized power plants of an output of 50 MW or less in localities with difficult socio-economic conditions, investment projects on building hydropower plants of an output of over 50 MW and thermal power projects) and independent power grids to supply electricity for rural areas, which are not connected with the national power grid.

Projects on building, expansion and renovation of power .transmission lines for a voltage of 35 kV or 22 kV- projects on renovation of 6 kV, 10 kV or 15 kV power lines into 22 kV ones.

-Investment projects on intermediate transformer stations for a voltage not exceeding 35 kV andriistribution transformer stations.

Investment projects on low-voltage axial lines of 0.2 kV and 0.4 kV from low-voltage outgoing feeders of distribution transformer stations to the last poles of power lines in villages and hamlets and branch lines to electricity meters of consuming households.

Investment projects on power transmission lines from electricity meters to electricity-consuming places of households that are social policy beneficiaries (including poor households and households having two or more severely disabled members who are unable to take care of themselves) and meet with exceptional difficulties certified by district-level People's Committees at the request of commune-level People's Committees. Particularly, poor households meeting with exceptional difficulties only need certifications of commune-level People's Committees.

2.2. Households that are social policy beneficiaries (including poor households and households having two or more severely disabled members who are unable to take care of themselves) or meet with exceptional difficulties certified by district-level People's Committees at the request of commune-level People's Committees and use their own money to build power transmission lines from their electricity meters to electricity-consuming places. Particularly, poor households meeting with exceptional difficulties only need certifications of commune-level People's Committees.

Provincial-level People's Committees shall base themselves on their practical local conditions to set appropriate criteria for identifying households which are social policy beneficiaries and meet with exceptional difficulties to serve as a basis for district- or commune-level People's Committees to consider and certify investment incentive policy beneficiaries.

This Circular does not apply to projects already entitled to investment incentives given by other support programs (loans from official development assistance programs, international organizations, domestic or foreign organizations and individuals).

3. Conditions on and principles for provision of supports

3.1. Conditions on provision of supports

Projects eligible for the investment support policy under this Circular's guidance must satisfy the following conditions:

a/ They are specified in Clause 2, Section I of this Circular and covered by an approved electricity development planning.

b/ They are specified at Point 2.1, Clause 2. Section I of this Circular and implemented in localities with difficult or exceptionally difficult socio-economic conditions specified in the Government's Decree No. 108/2006/ND-CP of September 22, 2006, detailing and guiding the implementation of a number of articles of the Investment Law; and the Prime Minister's Decision No. 30/2007/QD-TTg of March 5, 2007, promulgating the list of administrative units at the commune, ward or township level in difficulty-hit areas.

c/ The investment specified at Point 2.2, Clause 2, Section I of this Circular is made in households that are social policy beneficiaries and meet with exceptional difficulties certified by district- or commune-level People's Committees and reside in rural or mountainous areas or islands.

3.2. Principles for provision of supports

a/ The investor of an investment project specified at Point 2.1, Clause 2, Section I of this Circular may only choose either of the two forms of state investment credit: investment loans or post-investment supports.

b/ For investments in power transmission lines from electricity meters to electricity-consuming places of households that are social policy beneficiaries and meet with exceptional difficulties certified by district- or commune-level People's Committees which are eligible for support investment capital from local budgets, investment cost estimates must be made and approved by competent authorities under the

State Budget Law. At the same time, these investment projects will be provided with supports in investment loan interest rates as follows: Projects invested by enterprises or economic organizations may be provided with investment loans or post-investment supports by the Vietnam Development Bank. Poor households meeting with exceptional difficulties but wishing to invest in power transmission lines may borrow concessional credit loans (to cover the difference between total investment money and support investment money from local budgets) from the Social Policy Bank under regulations.

c/ Projects eligible for investment loan interest rate supports must have their financial plans and loan repayment plans evaluated and approved by the Vietnam Development Bank or the Social Policy Bank before providing loans.

d/ Investors who enjoy investment loan interest rate or investment capital supports for their projects under this Circular shall use investment loans, post-investment or investment capital supports for proper purposes. Investors who are provided with investment loans shall pay loan principals and interests under signed credit contracts and fully fulfill their commitments and comply with the provisions of this Circular.

e/ The investor of a project consisting of many component projects (investment projectson building transmission lines to and from electricity meters) shall, based on the project scope and target beneficiaries, identify forms of investment credit and investment capital supports conformable with the conditions on and principles for provision of supports specified at Points 3.1 and 3.2. Clause 3, Section I of this Circular.

3.3. Capital sources for provision of supports

a/ Capital for provision of credit loans of the Vietnam Development Bank and the Social Policy Bank.

b/ The central budget, which shall make up for the difference between the investment loan interest rate and capital-raising interest rate, and cover management expenses and post-investment support interest rate differences for the Vietnam Development Bank and the Social Policy Bank under regulations.

c/ Local budgets, which shall ensure the provision of investment capital support for projects on building power transmission lines from electricity meters to electricity-consuming places of households that are social policy beneficiaries and meet with exceptional difficulties.

d/ Other lawfully raised capital sources.

II. SPECIFIC PROVISIONS

1. Investment capital incentives

Based on their annual credit plans approved by competent authorities for electricity development projects under this Circular, the Vietnam Development Bank shall provide investment loans or post-investment supports; the Social Policy Bank shall provide concessional credit loans; and provincial-level People's Committees shall provide investment capital supports from local budgets for projects specified in Clause 2. Section I of this Circular, specifically as follows:

1.1. Investment loans

a/ Lending form: Partial lending of investment capital.

b/ Lending conditions:

Investors are those specified in Clause 2. Section I and satisfying the conditions and complying with principles specified in Clauses 3.1 and 3.2, Section I of this Circular.

Investors have completed investment procedures under law.

Investors have the legal entity status under law (excluding poor households meeting with exceptional difficulties and eligible for loans from the Social Policy Bank).

Investors have projects and production or business plans, guarantee to repay loans and have financial plans and loan repayment plans evaluated and approved by the Vietnam Development Bank and the Social Policy Bank before the loan provision.

Investors ensure sufficient capital sources for project implementation and specific financial conditions of their own investment capital amounts under regulations of the Vietnam Development Bank and the Social Policy Bank.

Investors secure loans under regulations of the Vietnam Development Bank and the Social Policy Bank.

c/ Lending level, term and interest rate, repayment of loans and offsetting of risks:

For loans from the Vietnam Development Bank: These loans shall be provided in compliance with the Government's Decrees No. 151/20067ND-CP of December 20.2006. and No. 106/2008/ND-CP of September 19, 2008. and the Finance Ministry's guiding documents.

For loans from the Social Policy Bank:

The lending level for a concessional credit loan shall be decided and announced by the Social Policy Bank based on the demand for loans and the capital-raising capability in each period.

The lending term shall be set by the Social Policy Bank based on loan use purposes of borrowers, taking into account their repayment capability.

The preferential lending interest rate shall be decided by the Prime Minister for each period at the request of the Social Policy Bank and uniformly applied nationwide. The overdue debt interest rate is equal to 130% of the lending interest rate.

Borrowers shall repay both principals and interests (if any) when due. The time limit for regarding debts overdue shall be prescribed by the Social Policy Bank.

Risks shall be classified for consideration and handling of investment credit debts under Article 20 of the Government's Decree No. 78/2002/ND-CP of October 4,2002. on credit for the poor and other policy, beneficiaries.

1.2. Post-investment supports

a/ Form of post-investment supports: the Vietnam Development Bank shall provide post-investment supports based on investors' loan repayment results.

b/ Conditions on provision of post-investment supports:

Projects are eligible tor post-investment supports as specified at Point 2.1. Clause 2. Section I of this Circular and fully satisty the conditions and comply with the principles specified in Clauses 3.1 and 3.2, Section I of this Circular.

Projects are evaluated, considered and approved by the Vietnam Development Bank before to conclusion of contracts on provision of post-investment supports.

Projects have been completed and put into operation, have credit contracts signed with credit institutions and loan principals and interests fully paid under these credit contracts as specified by lending credit institutions.

c/ Post-investment support principles and levels comply with the Government's Decrees No. 151/ 20067ND-CP of December 20,2006, and No. 106/ 2008/ND-CP of September 19, 2008, and the Finance Ministry's guiding documents.

1.3. Investment capital supports

a/ Entities eligible for investment capital supports

Investors of projects specified in Clause 2, Section I and satisfying all the conditions and complying with the principles specified in Clauses 3.1 and 3.2, Section I of this Circular.

Households in rural or mountainous-areas or islands which are social policy beneficiaries and meet with exceptional difficulties certified by district- or commune-level People's Committees under Clause 2. Section I, on the basis of public and democratic assessment and selection, and verification and certification at the grassroots level.

b/ Conditions on provision of investment capital supports

- Only those specified in Item a, Point 1.3, Clause 1, Section II of this Circular are eligible for investment capital supports.

- Expenses for building power transmission lines from electricity meters to electricity -consuming places of households that are social policy beneficiaries and meet with exceptional difficulties in rural or mountainous areas or islands must be evaluated by provincial-level People's Committees before deciding on investment capital support levels from local budgets.

c/ Investment capital support levels

Provincial-level People's Committees shall base themselves on their practical local conditions and budget capability to decide on specific levels of investment supports for building power transmission lines from electricity meters to electricity-consuming places of households that are social policy beneficiaries and meet with exceptional difficulties in rural or mountainous areas or islands.

d/ Capital sources for provision of investment capital supports from local budgets include:

- Investment capital additionally allocated from the central budget to local budgets for target programs.

- Investment capital incorporated in local budget balances under the State Budget Law.

- Contributions of local organizations and individuals under law.

2. Tax incentives

Enterprises, economic organizations and households that invest in projects on electricity development in rural and mountainous areas and islands as specified in Clause 2, Section I of this Circular will enjoy tax incentives provided for by law.

III. DOSSIERS FOR AND ORDER OF PROVISION OF PREFERENTIAL INVESTMENT CAPITAL SUPPORTS

1. Dossiers for preferential investment capital supports

1.1. Dossiers of request for investment loans

Investors having projects eligible for investment loans and satisfying the conditions specified in this Circular shall send their dossiers of request for investment loans made under regulations to the Vietnam Development Bank or the Social Policy Bank for examination before considering and deciding on lending levels.

a/ For loans from the Vietnam Development Bank: They shall comply with the Finance Ministry's Circular No. 69/2007/TT-BTC of June 25, 2007, guiding a number of articles of the Government's Decree No. 151/2006/ND-CP of December 20, 2006, and documents guiding the Government's Decree No. 106/2008/ND-CP of September 19,2008.

b/ For loans from the Social Policy Bank: They shall comply with the guidance of the Social Policy Bank.

1.2. Dossiers of request for post-investment supports

Such a dossier shall be made in accordance with the Finance Ministry's Circular No. 69/2007/ TT-BTC of June 25, 2007, guiding a number of articles of the Government's Decree No. 151/2006/ ND-CP of December 20, 2006. and documents guiding the Government's Decree No. 106/2008/ ND-CP of September 19,2008.

1.3. Dossiers of request for investment capital supports

a/ The investor's written request for investment capital supports for building a power transmission line from electricity meters of electricity-consuming places of households that are social policy beneficiaries and meet with exceptional difficulties in rural or mountainous areas or islands.

b/ Dossiers and documents evidencing the investor's legal capacity; a list of households which are social policy beneficiaries, meet with exceptional difficulties and are eligible for capital investment support with signatures of these households' heads and the certification of the commune, ward or township where these households reside.

c/ Documents and dossiers relevant to the investment in building a power transmission line from electricity meters to electricity-consuming places of households that are social policy beneficiaries and meet with exceptional difficulties in rural or mountainous areas or islands.

d/ Other relevant documents required by the provincial-level People's Committee providing investment capital supports.

The above dossiers and documents shall be sent to the provincial-level People's Committee for examination before considering and deciding on provision of investment capital supports.

Within 30 working days after the Vietnam Development Bank and the Social Policy Bank (for projects requesting provision of investment loans or post-investment supports) or provincial-level People's Committees (for projects requesting provision of investment capital supports) receive complete and valid dossiers, these agencies shall reply in writing to investors on whether they approve or disapprove (with reasons) the provision of investment supports for projects under regulations.

2. Payment and settlement procedures

2.1. Payment and settlement procedures for projects eligible for investment loans or post-investment supports

- Payment procedures applicable to projects eligible for investment loans or post-investment supports shall be guided by the Vietnam Development Bank and the Social Policy Bank.

- Settlement procedures for projects eligible for investment loans or post-investment-supports comply with the Finance Ministry's Circular No. 33/2007/TT-BTC of April 9, 2007, guiding the settlement of completed projects fundedwith state capital; and Circular No. 98/2007/TX-BTC of August 9, 2007, amending and supplementing a number of provisions of Circular No. 33/2007/TT-BTC of April 9,2007.

2.2. Payment and settlement procedures for projects eligible for investment capital supports from local budgets

Payment and settlement procedures for projects eligible for investment capital supports from local budgets comply with the State Budget Law and guiding documents. After obtaining provincial-level People's Committees' decisions on provision of investment capital supports for projects, investors shall send dossiers made under Point 1.3, Clause 1. Section III of this Circular (enclosed with provincial-level Peopie's Committees' decisions) to financial agencies or State Treasury in localities where they make investment for the latter to carry out procedures for payment and settlement under the Finance Ministry's Circular No. 27/2007/TT-BTC of April 3. 2007, guiding the management and settlement of investment capital and nonbusiness capital from the state budget for investment purposes; Circular No. 130/2007/TT-BTC of November 2, 2007, amending and supplementing a number of provisions of Circular No. 27/2007/TT-BTC of April 3. 2007; Circular No. 33/2007/TT-BTC of April 9,2007, guiding the settlement of completed projects funded with state capital; and Circular No. 98/2007/TT-BTC of August 9, 2007, amending and supplementing a number of provisions of Circular No. 33/2007/TT-BTCofApril9,2007.

IV. ELABORATION OF COST ESTIMATES AND REPORTS, INSPECTION AND EXAMINATION

1. Provincial/municipal People's Committees shall:

1.1. Direct provincial-level Finance Services and Planning and Investment Services to coordinate with local branches of the Vietnam Development Bank and the Social Policy Bank and concerned agencies in identifying funding needs covered by local budgets under this Circular and making plans on allocation of funds from local budgets and other lawful financial sources, then submitting them to competent authorities for approval before providing investment capital supports for projects to build power transmission lines from electricity meters to electricity-consuming places of households that are social policy beneficiaries and meet with exceptional difficulties in rural or mountainous areas or islands under the State Budget Law.

Direct and regularly inspect provincial-level services, branches and lower-level People's Committees in organizing the implementation of electricity projects; managing and using funds for project implementation for proper purposes and in compliance with policies and regulations; coordinating with concerned agencies in inspecting the use of capital support or loans and urging the recovery of debts; direct lower-level People's Committees, especially commune-level People's Committees, in coordinating with socio-political organizations in supervising the consideration and selection of households being social policy beneficiaries and meeting with exceptional difficulties to be eligible for loans or capital supports, ensuring public information and publicization of the State's support policies on the mass media in communes or villages and at offices of commune-level People's Committees under regulations.

Report, within 15 days after the end of the second or fourth quarter of every year, to the Finance Ministry, the Industry and Trade Ministry and the Planning and Investment Ministry on investment in electricity projects in rural and mountainous areas and islands for review and reporting to the Prime Minister.

2. Investors shall:

2.1. Report, within 15 days after the end of every quarter, on the investment and settlement of investment capital of supported projects to agencies that have decided on the provision of investment capital supports, planning agencies and financial agencies for management and monitoring.

2.2. Make and send year-end reports on disbursement of investment capital in a year and reports on investment loans or post-investment supports or investment capital supports for their projects, which have been received from the time of receipt to the reporting time, to agencies providing investment supports (local branches of the Vietnam Development Bank or the Social Policy Bank) or local State Treasury and financial agencies in localities where they make investment by February 15 of the following year.

3. Responsibility of the State Treasury

At the end of every year, the State Treasury in localities where investors make investment shall certify capital amounts paid in the year, calculating the total capital amount paid for each project from the time of support provision to the end of the state budget year.

4. Responsibility of the Vietnam Development Bank and the Social Policy Bank

Annually, the Vietnam Development Bank and the Social Policy Bank shall elaborate plans on and identify needs for investment loans and post-investment supports from the state credit source, then send them to the Planning and Investment Ministry and the Finance Ministry for reviewing and reporting to the Government for submission to the National Assembly for decision under the State Budget Law..

The Vietnam Development Bank and the Social Policy Bank shall review and report the provision of investment loans and post-investment supports in a year for electricity development projects specified in this Circular to the Finance Ministry, the Industry and Trade Ministry, the Planning and Investment Ministry and the State Bank of Vietnam no later than March 31 of the following year.

V. ORGANIZATION OF IMPLEMENTATION

This Circular takes effect 15 days'after its publication in "CONG BAO." Any problems arising in the course of implementation should be reported to the Industry and Trade Ministry and the Finance Ministry for study and solution or appropriate revision of this Circular.