The matter of the Gas Infrastructure Development Cess (GIDC) has been in the news and under much scrutiny. The GIDC has been a thorn in the government’s side since it was first imposed by the PPP government in 2011. The current government issued a presidential ordinance just a few days back, on the matter of allowing gas consuming companies to get away with returning half of the more than Rs400 billion owed under the GIDC to the government. The issue became controversial after it was represented as a subsidy to powerful corporate interests. After a couple of days of strong advocacy of the measure from various government ministers, on Wednesday the federal government reversed the decision. The reversal has come in for even more criticism, which now leaves the government with a catch-22 situation. The trouble is that the government has, like before, acted with haste. The GIDC issue could not be resolved by the two governments before this one. Instead of working behind closed doors, the PTI would have done better to have resolved the GIDC issue publicly – through parliamentary debate and informing the public about the details.
The GIDC was imposed under the PPP government in 2011 on commercial gas consumers. Within a year, it was declared illegal by the Peshawar High Court, which decision was ratified by the Supreme Court of Pakistan. Later, the GIDC was reimposed through legislation in 2015, before industrialists took the government to court over the matter once again. This means that the GIDC, which was imposed to fund the construction of new gas pipelines and LNG facilities, has remained in litigation for almost eight years. A second complication is created by the fact that, even though the GIDC was illegal, industries have been including it in the cost they have been charging to their customers. This created a situation where the GIDC was collected by industries, but not paid to the government, while questions remained over the legality of the cess in the first place. While there could be legitimate questions about whether the government can collect such a cess or not, what is abundantly clear is that private businesses have no right to keep the cess. This is where the PTI’s offer of a Rs210 billion amnesty to business came in.
The problem with the move is that it would allow big businesses to keep Rs210 billion in illegally collected money. This is why the federal cabinet decided to include a forensic audit as a condition for signing a settlement agreement with each of the sectors involved. Instead, the federal government has now fully reversed the decision, which leaves industries with hundreds billions of rupees worth of illegally collected GIDC from consumers. The government's team of economic advisers told the press on Wednesday that farmers have been charged higher prices on fertilizer due to a cess that was never transferred to the government. This is the most ridiculous part of this issue. By choosing a poor way of trying to get the GIDC into its coffers, the government may have inadvertently benefitted private companies more than it wished to. While the legality of the cess should be decided by the courts, it is vital that any illegally collected GIDC be returned to consumers – or find its way into the government’s coffers. The current situation should not be acceptable under any circumstances.
