Amid the insufficient revenues and the circular debt issues, the government is going to use all available resources – both administrative and legal – to recover Rs447 billion Gas Infrastructure Development Cess (GIDC) from commercial and industrial entities.
This decision was taken at a meeting presided over by Finance Minister Ishaq Dar as these business entities have blocked the payment of their dues through high courts despite standing orders of the Supreme Court.
It was noted that the Supreme Court in a 2020 judgment had dismissed all appeals with very clear orders to recover all GIDC accrued by 2020-21 but suspended future imposition till such time cess was utilised.
As a relaxation to various sectors, the apex court had, however, ordered that all GIDC dues as of July 31, 2020, be recovered by the government in 24 installments without a late payment surcharge. At the same time, the court also allowed a late payment surcharge for the delays in payment of “any of the 24 installments”.
However, a total of 3,194 litigants blocked those payments on procedural grounds in various high courts. “Examining the court’s decisions and stay orders, the finance minister expressed serious concerns over the non-recoveries of GIDC dues and expressed the resolve of the government to recover each penny from the defaulters,” said an official statement.
He directed the authorities to share an updated break-up of arrears of sector-wise GIDC in the next meeting to frame up legal and administrative strategy for fast-track recovery of the outstanding dues.
Sources said the government could also lose powers to collect GIDC and the GIDC law would stand annulled in case of failure of the government to carry out development projects like pipelines from Turkmenistan, Iran, or from Karachi to Lahore subject to the conducive international and political environment.
It is said that the gas companies can consider using administrative and technical means like reducing pipeline pressure for various sectors to force them to pay their dues besides hiring external legal counsels with fixed and performance fees linked with the proportionate recovery of GIDC arrears to conclude the court cases against chronic defaulters.
An out-of-court settlement would be another option like a similar dispensation earlier given to the CNG sector for partial payment of dues besides adjustments against their various refunds and subsidy claims.
According to the Petroleum Division, total GIDC payable by various sectors stood at Rs796 billion, of which Rs349 billion had been received by the government. The remaining amounts payable by fertilizer sector now stood at Rs191 billion, Rs82 billion by CNG, Rs98 billion by industry (including Rs54 billion of capital power, Rs21 billion of general industry and Rs23 billion against textiles) followed by Rs39 billion against K-Electric.
What is GIDC?
A “cess” is an additional tax imposed by the government with a specific goal in mind. For instance, the GIDC is a tax which is essentially collected for gas-related development activities throughout Pakistan. To put it another way, the government collects more revenues on top of the taxes you already pay to fund particular initiatives.
Following the agreement of the Iran Pakistan gas pipeline, the PPP government GIDC in November 2011. This cess was first proposed as a Money Bill on November 25, 2011.
The primary goal of the GIDC levy was to earn money for the construction of infrastructure for international gas pipelines. Included in this are projects for liquefied natural gas (LNG) as well as pipelines that cross international borders.
The fertilizer industry, the CNG industry, IPPs, captive power plants, and essentially everyone with an industrial gas connection were all subject to this cess. As a result, it was neither imposed on nor directly collected from the general population.
The government imposed this cess on commercial gas connections, and this sum was supposed to be recovered from these businesses through higher gas prices. However as any business would, these companies raised their pricing to reflect the rise in production costs.