Gas infrastructure remains underdeveloped as Rs818bn GIDC awaits intended use

During the last nine years, the federal government has collected Rs818 billion as Gas Infrastructure Development Cess (GIDC), however, it has failed to invest the collected amount towards improving and building the country’s gas infrastructure.

According to well-placed sources, the volume of collectable GIDC from various sectors was increased to Rs517 billion on March 31, 2020. However, till now none of the GIDC reserves have been utilised for the purpose they were collected for. 

According to documents, the previous government collected Rs295 billion as GIDC and employed it for budgetary purposes other than building gas infrastructure due to which the current government now has to raise another Rs295 billion from its future tax collections. 

Out of the Rs517 billion collectable GIDC, the fertiliser sector will pay Rs195 billion, the power sector will pay Rs76 billion, and the captive power and Compressed Natural Gas (CNG) industry will pay Rs 246 billion.

According to sources, following a decision of the Supreme Court (SC) on GIDC, the Petroleum Division will have to spend a substantial part of the already collected GIDC on gas infrastructure projects to justify its collection. 

The SC in its decision had given a timeframe of six months to the government to initiate gas infrastructure development projects by utilising the amount collected under the GIDC Act.

Sources said that in case the government fails to start the North-South Gas Pipeline (NSGP) project within the deadline, the GIDC Act would be considered invalid forever. 

Sources further said that the Petroleum Division has sought answers from the Law Division on some important questions related to GIDC, which include questions related to failing to start work on the NSGP project within six months and its effect on the collection of the remaining 18 GIDC installments. Moreover, the Petroleum Division has also asked the Law Division if it would have to issue a refund to the consumers if it fails to spend the collected GIDC amount in the next few years and whether it can include additional gas infrastructure projects.

Similarly, the Petroleum Division has also inquired about the proper course of action in case a consumer defaults on an installment payment, if a consumer shuts down or wants an extension in payment deadline. 

Earlier, in 2011, the federal government had enforced GIDC through the Finance Act. In 2014, an ordinance was approved and was given legal status through GIDC Act 2015, which gave protection to the already collected GIDC. 

Since then, GIDC collection has witnessed a visible decrease after the grant of stay orders by courts.

The current government had waived off half of the collected amount under GIDC in June 2019 in order to avoid future court cases. 

However, the GIDC ordinance was later withdrawn by the government which requested the SC to initiate a hearing on the matter. 

As per documents, the SC in its judgment on GIDC stated that GIDC is a fee for building specified gas infrastructure projects rather than a tax. The SC said that the government has been collecting the fee for nine years despite failing to provide the intended service.

Currently, the collection of GIDC has been suspended since August 1, 2020, until the already collected amount is spent on gas infrastructure projects.

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