Gas infrastructure cess waiver not a free lunch, says govt

ISLAMABAD: The government has termed the waiving of multi-billion rupee Gas Infrastructure Development Cess (GIDC) to industrial sector as a big success and in the best interest of nation but also said that ‘it is not a free lunch’ and the government would carry out forensic audit of some sectors.

While addressing a press conference along with Adviser to Prime Minister on Petroleum Nadeem Babar, Minister for Energy Omar Ayub Khan termed it a big success and said that it was not free lunch for those who had been waived billions. He said that government would conduct forensic audit of fertilizer plants to assess how much money on account of GIDC they had received from the farmers.

The government would carry out forensic audit of the fertilizer sector, as to know the real volume of collection under the GIDC, and only those plants would be allowed to avail themselves of the low GIDC rate whose accounts have been audited and the plants, which had charged high GIDC, they would be liable to pay back to the farmers. They also ruled out any benefits being given to different groups. They said that GIDC rate was high and this was being reduced by 50 percent.

After this ordinance, the government would be collecting Rs42 billion every year against current collections of only Rs15 billion. Besides, the long-standing litigations with the business community would also come to an end and the reduction in GIDC rate would also boost the industries. Under this ordinance, the government has made it clear to the industries that they can avail themselves of 50 percent cut, if they take back their cases against the government. After this, the government expects collection of Rs210 billion. The government has waived Rs65 billion outstanding against the new fertilizer plants saying that they were not liable to pay GIDC under agreements signed during Pakistan People’s Party (PPP) government. But, interestingly, those new plants had also charged and collected the GIDC from farmers by increasing urea prices. Besides, these plants had not been receiving gas on discounted rates, but they have been waived this amount.

The PTI government under the ordinance had penalised those sectors like small industry that continued paying this tax for last eight years. However, those which had not paid and obtained stay orders from courts, the government had waived around Rs200 billion.

There was total Rs417 billion pending against these sectors, of which old fertilizer plants have to pay Rs71 billion, new fertilizer plants Rs65 billion, general industry Rs43 billion, IPPs Rs10 billion, K-Electric Rs34 billion, Wapda Gencos Rs30 billion and CNG Rs78 billion. The new fertilizer plants would not pay whereas other sectors could avail themselves of the schemes of waiving 50 percent outstanding.

Nadeem Babar said that export-oriented sectors were being exempted from new rate of 50 percent GIDC. The new fertilizer plants had also been exempted from the GIDC. The new fertilizer plants had obtained stay order from court saying that GIDC was not applicable on them under a policy, Babar said. The Cess was imposed to recover money to utilize for setting up infrastructure of imported gas. He said that money collected on this head had been used for budgetary support and therefore different courts had given stay order against recovery of GIDC.

Babar said that collection of GIDC was 15 percent during last eight years whereas 85 percent recovery was not being made due to stay orders obtained from the courts.

He said that PML-N had also got approved GIDC Act from Parliament enabling the CNG sector to pay 50 percent outstanding. He said that this process had continued following consultation with different industries.

Omar Ayub also said that a committee had been formed to analyse the profits and agreements with IPPs. He said that this committee would also assess the heat rate and energy audit of IPPs.