January 18, 2019 (MLN): The long impending issue of Gas and Infrastructure Development Cess (GIDC) has been creating turmoil amongst the industrial consumers as the amounts paid prior to GIDC Act have not been settled by the gas authorities and the issue still persists.
The GIDC was imposed by government back in December 2011 to raise funds for development of gas infrastructure in country, including Iran Pakistan (IP) gas pipeline, Turkmenistan-Afghanistan-Pakistan-India (TAPI), LNG and other ancillary projects.
However, the Peshawar High Court in December 2013 declared the levy and imposition of GIDC unconstitutional and demanded reimbursement of the money collected thus far within a reasonable time, either in lump sum or by adjusting the monthly bills of the consumers.
Majority of the industrial consumers still continued payment of GIDC in law abiding manner to avoid further penalties. In May 2015, GIDC Act 2015 was passed whereby all industrial gas consumers were exempted from previous liability if it was not collected by the consumers; whereas GIDC was further imposed at the rate of Rs. 100 per MMBTU.
“The government missed its actual collection target of GIDC by average of 56% in the last five years, as Sindh High Court in its verdict concluded that GIDC ultra vires the constitution. This case is still pending in the Supreme Court” an analyst from Topline Securities told Mettis Global News.
“However last year, through an amendment to GIDC act, the government notified to collect 50% of the Cess levied from January 2012 to May 2015 in two tranches for the CNG sector,” he said. “All Pakistan CNG Association agreed to pay due amount of Rs12 billion.” he added.
Lately, possible resolution of this long pending issue has been making rounds, which can result in similar resolution that was suggested for CNG stations.
As per the report by Topline Securities, government has asked for out of the court settlement Punjab based Textile with offer of waiver in Late Payment Surcharge (LPS) on outstanding amount of GIDC at mark up of KIBOR+4%.
Several listed companies have been accruing GIDC in their financial statements, including Lotte Chemicals, Engro Polymers and Chemicals, Feroze1888 Mills, Gul Ahmed Textile Mills, Maple Leaf Cement, Baluchistan Glass, among others. Out of these, EPCL, LOTCHEM, GATM, and FML would be the key beneficiaries as per the expectations of Topline Securities.
However, some companies are not accruing this Cess amount in their financial statements like Tariq Glass, Azgard9 Limited and Hira Textile amounting to Rs600-700 million (estimated), Rs146 million and Rs74 million respectively. The earnings for these companies are likely to be negatively impacted in case they don’t book the GIDC amount.
Copyright Mettis Link News
25466
