A Business Recorder exclusive had revealed that the raise in Gas Infrastructure Development Cess (GIDC) would generate greater revenue from Sindh industry, particularly the textile sector that operates captive power plants as opposed to Punjab. The reason: Sindh has no gas shedding as opposed to Punjab premised on Article 158 of the Constitution, which stipulates "the province in which a wellhead of natural gas is situated, shall have precedence over other parts of Pakistan in meeting requirements from that wellhead."
The government budgeted 38 billion rupees under GIDC in 2013-14, which, unconfirmed reports indicate, may be as high as 120 billion rupees though the budget documents maintain 88 billion rupees was collected under this head. In fiscal year 2014-15, GIDC collection is projected at 145 billion rupees. The rise in revenue under GIDC would be mainly from Sindh given that the province's textile industry has access to gas 24/7 while the Punjab textile mills do not, leading to a discrepancy in the costs of production, which is adversely impacting on sales of Punjab textile industry. This has fuelled a widespread perception in Sindh that the GIDC rates were raised after an extremely influential pro-Pakistan Muslim League-Nawaz constituency in Punjab convinced the federal government that this step is necessary to enable Punjab industry compete with Sindh in the market.
GIDC is a dedicated fund that, as per a Supreme Court verdict, cannot be used for purposes other than to meet the country's growing gas shortfall through three identified projects notably the Iran-Pakistan gas pipeline project, the Turkmenistan-Afghanistan-Pakistan-India gas pipeline project, import of Liquefied Natural Gas (LNG) from Qatar (or any other source) or for price equalisation of imported alternative. The government can, of course, use the cess revenue for other domestic or regional gas projects than those already identified but cannot use the money for budgetary support. In this context, it is relevant to note that the International Monetary Fund's (IMF) second staff review under the Extended Fund Facility (EFF) dated 7th March 2014, noted that "the increase in GIDC coupled with higher than envisaged quantities is expected to deliver around 0.36 percent of Gross Domestic Product (annualised) in additional revenue" and a footnote indicates that "the increase (in GIDC) will not only strengthen tax revenues but will also lead to better utilisation of gas". In the first Letter of Intent submitted by the government to the IMF under the EFF, the government committed to raising GIDC to 0.4 percent of GDP. Thus there is an expectation of a further rise in GIDC as well as a clear intent of the government to use the cess for general budgetary support. The government must consider raising gas prices instead of cess if its intent is to raise total revenue.
It is this perception that led the Sindh government to write a letter to the federal government arguing that Sindh should receive the lion's share of GIDC as it is mainly collected from Sindh. A Petroleum Ministry official has maintained that the GIDC is being placed in the federal consolidated fund and thereafter distribution is according to the formula agreed under the National Finance Commission Award. However, Article 157 (3) of the Constitution maintains that in case of dispute between the federal government and a provincial government in respect of any matter, any of the said governments may move the Council of Common Interests (CCI) for resolution of the dispute. One would strongly urge the federal government to take the initiative and discuss the matter in the CCI as it would provide Sindh the opportunity to air its own concerns with respect to the raise in the levy as well as the recipient of the GIDC proceeds. Failure to do so would only fester relations between the federal and Sindh governments and at this juncture in our history the focus of the federal and provincial governments must be on dispute resolution and not on dispute creation.
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