Govt collects Rs16 billion GIDC in 2020-21

Ibn-e-Ameer

The government has collected Rs 16 billion from textile and fertilizer companies through gas infrastructure development cess (GIDC), from consumers.GIDC is a form of gas tax that the government is charging consumers to build mega pipeline projects.

What Does Gas Tax Pay For

The Sui companies like SNPL and SSGC have been supplying gas to consumers. Consumers have been paying tax on the supply of gas for the last few years. However, textile and fertilizer companies had refused to pay this tax.

The PPP government had imposed this gas tax on the consumers and started collecting bills to finance the mega projects of gas like Iran-Pakistan (IP), TAPI, and LNG pipelines.

Since that time, consumers had been paying this gas tax. However, fertilize and textile companies had obtained stay orders from courts that barred the gas tax collection.

The present government of PTI had decided to waive off 50 percent GIDC on the textile and fertilizer companies in Pakistan. However, it led to controversy and caused landed in Supreme Court.

The apex court had turned down a decision of the government and directed the companies to pay this gas tax in 24 equal installments starting from August 2020.

Since the decision of the apex court, different consumers including textile and fertilize companies have started paying gas infrastructure development cess (GIDC) on the supply of gas.

Gas Tax collection in the financial year 2020-21

The apex court had decided to recover the gas tax from the consumers. Therefore, Sui companies started recovering the tax in gas bills.

The state-run companies-SNGPL and SSGC have collected Rs 16.09 billion during the financial year 2020-21 up to April. The Sui companies have collected Rs 11.53 billion in line with the decision of the apex court. However, the normal collection stands at Rs 4.5 billion.

Total Collection

The Sui companies have collected Rs 321.4 billion from the consumers as of April 2021. This is a total collection of gas tax since the PPP government had imposed it in the year 2015.

The previous government of PML-N had also collected this tax in the gas bills of the consumers. However, it had not been spent on the gas pipelines.

Even Sui companies-SNGPL and SSGC had augmented the gas pipelines to transport imported gas from Karachi to Lahore. However, the PML-N government had not spent gas tax money on building this pipeline.

The previous government had spent this money on current expenditure. Moreover, it had diverted this money to execute Orange train Project in Lahore. So, there was a misuse of money.

Total Gas Tax Outstanding

At present, the total outstanding in the gas sector on account of gas tax amounts to Rs 473 billion. Sui companies had not been able to recover this amount due to litigation and circular debt. Some other amount is pending as well.

Outstanding due to High Court Stay Order

Fertilizer and textile companies had filed cases in different cases and obtained stay orders to stop the collection of the gas tax.

These companies had pleaded before courts that the government had filed this tax on the consumers and collected in gas bills for building megaprojects of gas pipelines.

Read More: Govt for amicable solution of GIDC payment

They said that governments had failed to build this pipeline project. Keeping in view this plea, the court had granted stay orders.

It is also interesting to note that past governments had not pursued the cases well and therefore, stay orders continued for years.

Due to staying orders, Sui companies were barred from collecting this gas tax from those who had obtained stay orders. This amount continued piling as the gas companies had booked them in their record.

Read More: Supreme Court reserved decision on GIDC

This amount had swelled to Rs 356.5 billion due to stay orders different courts had granted and barred the companies to collect from the consumers.

Outstanding due to Circular Debt

The circular debt has been like a ghost in Pakistan that has haunted all the governments. In the power sector, the circular debt had touched double-digit as it went up to Rs 2.3 trillion against Rs 1.6 trillion when this government came into power.

Due to debt in the power sector, the oil and gas companies were also bleeding. The debt in oil and gas companies had also touched Rs 1.6 trillion marks.

Read More: PSO to get stakes in Guddu, Nandipur plants

The petroleum division had taken up the matter before the economic coordination committee (ECC). It had also proposed a plan of transfer of shares of power sector companies to Pakistan State Oil (PSO).

It had also proposed the transfer of shares of PSO in other gas companies to clear receivables and payables.

The ECC had formed a body to formulate a plan. However, there had not been progressing on this issue. However, the debt in the energy sector had also impacted the collection of gas tax from the consumers.

It had piled up to Rs 31.1 billion that is stuck due to circular debt in the energy sector. Sui companies are struggling to recover it from the consumers in gas bills.

Gas Tax Outstanding without any litigation and circular debt

There is another amount of gas tax worth Rs 85.1 billion. This is the normal amount that Sui companies have to recover from the gas consumers. Litigation and circular debt have not been a reason for the delay in the recovery of this amount from the customers.

No Spending on mega gas pipeline projects

Though gas companies have recorded Rs 321.5 billion from the consumers during past years. However, the government had not spent a single penny on the gas pipeline projects so far.

The government continues fleecing the consumers for the last five years. However, this money has either gone into pockets of barons like fertilizer and textile companies or into the national exchequer.

This is an additional tax government has been collecting from the consumers to build pipelines.

North-South Pipeline Project

The apex court had given a deadline of six months to the government to execute the north-south gas pipeline project. However, the government had missed this deadline and it did not start work on building this pipeline so far.

The government is working with Russian to build this pipeline project. However, the divide in the government authorities had also delayed this project further.

Read More: Pakistan allocates $87m for North-South Gas Project

The higher rate of return Russian companies had demanded on this project, was another reason. Now, Pakistan has signed concerned deals on this project. Therefore, the two sides hope to start work on this project soon.

At present, two companies-Energas and Tabeer Energy are working on building new LNG terminals in Pakistan. The government needs to build a North-South pipeline to transport LNG from Karachi to Lahore.

TAPI Pipeline Project

Pakistan is also part of the TAPI pipeline project. Turkmenistan had built a pipeline in its territory. However, it has to start work on building pipelines in Afghanistan.

Now, Pakistan and Turkmenistan have entered into a row over revision in gas price and delivery point of the gas.

Turkmenistan claims that gas prices already set in the Gas Sales Purchase Agreement (GSPA) are low. However, Pakistan had claimed that it had imported LNG at a lower rate and therefore, it should revise the gas prices.

Read More: LNG imports pose a threat to TAPI?

Now, Pakistan and Turkmenistan are in negotiation to revise gas prices. Pakistani side claimed that Turkmenistan had agreed to cut the gas prices following the intervention of Pakistani president Arif Alvi.

Arif Alvi had talked to the President of Turkmenistan and requested to cut the prices. Now, two sides hoped to settle this issue.