The federal government has failed to settle Gas Infrastructure Development Cess (GIDC) issue in accordance with the understanding reached with domestic fertilizer industry. Last month, the government had allowed fertilizer industry an increase of Rs 10 per bag, just two rupees over and above the financial impact of GIDC reduction.
On July 19, 2019, the fertilizer industry was communicated the following decisions: (i) Petroleum Division would redraft GIDC law with date of applicability of reduced GIDC with effect from July 1, 2019 instead of signing the respective agreements, to be invoked after the agreements have been signed; (ii) FMPAC''s stance for redrafting of GIDC law regarding amount chargeable/levied under various GIDC Ordinances/ Acts to be taken into consideration by Petroleum Division while redrafting new GIDC law; (iii) MPAC''s suggestion for applicability of 50 per cent waiver in new GIDC draft law to take effect from the day of promulgation of GIDC Act against the suggested date by Petroleum Division i.e. December 31, 2019 if it does not become disputed.
GIDC amended law with effective date of July 1, 2019 would be in line with revision in gas prices as well as reduction in GIDC rates. Petroleum Division to consider it while drafting the GIDC amendment law; (iv) Secretary (Industries and Production) mentioned that GIDC settlement legislation applied to the entire fertilizer sector with no differentiation in old and new plants. This will be a voluntary arrangement and any player can accept or reject it; (v) for new plants with fixed price for feed gas, the settlement agreement would be between new plants and the gas supplier; and (vi) fertilizer industry''s agreement to increase urea prices at Rs 1840/ bag was acknowledged.
"Industry expected GIDC settlement Act or Ordinance to be promulgated as soon as possible, otherwise the companies are under severe financial pressure, as full gas price increase plus GIDC provision amounts to loss of Rs 200 per bag," said Brigadier Sher Shah Malik (retd, Executive Director Fertilizer Manufacturers of Pakistan advisory Council (FMPAC).
One of the major urea fertilizer manufacturers i.e. Fauji Fertilizer reportedly is facing big financial hit due to delay in promulgation of GIDC Act or Ordinance.
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