GIDC collection: Rs341bn remains un-utilised

ISLAMABAD: During the past eleven years Rs 340.789 billion has been collected under Gas Infrastructure Development Cess (GIDC) – from 2012-13 to date – and not yet utilised for dedicated gas infrastructure development projects identified in GIDC Act 2011.

No GIDC collection has been released to Inter State Gas Systems (Private) Limited (ISGS) since its establishment in 1996 whose mandate is to oversee the import of trans-national gas pipelines into the country and improve Pakistan’s strategic oil and gas sectors. The Auditor General of Pakistan (AGP) has highlighted the shortcomings in mechanism adopted in GIDC collection in several reports.

An official of Finance Division on condition of anonymity told Business Recorder that GIDC amount is not deposited in an Escrow Account; a representative of CNG Association however claimed that the proceeds from GIDC were deposited/credited in Federal Consolidated Fund (Account-1) allotted by Controller General of Accounts and is now depositing the amount with gas companies- Sui Northern Gas Pipeline Limited (SNGPL) and Sui Southern Gas Company (SSGC).

The matter of the non-utilization of GIDC was taken up by Public Accounts Committee (PAC) in July 2023 under its then chairman Noor Alam Khan and during a meeting the representative of Finance Division confirmed that funds collected under GIDC were unutilized.

AGP expressed serious concerns over GIDC collection in Audit Report 2022-23 and pointed out that: “financial management in Ministry of Energy (Petroleum Division) was deficient owing to absence of mechanism for assessment/ collection of non-tax receipts, recovery of arrears of GDS, GIDC, Petroleum Levy and Royalties. The management relied only on the information provided by the companies relating to due receipts”.

According to section 4 of the GIDC Act, 2011, the proceeds of cess will have to be used for a specific purpose as enumerated under section 4 which reads ’the cess shall be utilised for or in connection with infrastructure development of Iran Pakistan Pipeline Project, Turkmenistan Afghanistan Pakistan India (TAPI) Pipeline Project, LNG or other projects or for price equalisation of other imported alternative fuels including LPG“.

GIDC Act provides legal framework which allows government to levy and collect the cess from gas consumers other than from the domestic sector. In 2022-23, the revised GIDC estimate was Rs 9 billion and original budgeted estimate was Rs 30 billion.

In current fiscal year government would have to revise its GIDC budgetary estimates downward as collections in the first quarter (July-September) were only Rs 378 million against the budgeted estimates of Rs 40 billion for the entire year – a downward revision mainly due to stay orders in various courts of law, sources said.

The maximum collection of GIDC was in fiscal year 2015-16 at Rs 79.771 billion and the lowest was Rs 9.346 billion in 2019-20 due to stay orders granted by the courts.

Petroleum Division Audit 2021-22 observed that liberty was granted in applicable rules to purchasers of gas to pay Gas Development Surcharge (GDS) to the gas seller. On receipt of GDS, the gas seller was liable to deposit the same in Government Treasury within one month of receipt of GDS. However, no timeline was set in the rules framed by the Division for deposit of GIDC in Government Treasury.

The Supreme Court on August 12, 2020 decided that “all industrial and commercial entities, which consume gas for their business activities, pass on the burden to their customers; therefore, all arrears of Cess that have not been recovered so far, shall be recovered by the companies under the GIDC Act 2015 from their consumers.

However, as a concession, the amount will be recovered in 24 equal monthly instalments, starting August 1, 2020, without the imposition of a late payment surcharge.

The late payment surcharge will only become payable for delays that may occur in the payment of any of the 24 instalments.“

Following the agreement of the Iran Pakistan Gas Pipeline, the Pakistan Peoples’ Party government, led by former president Asif Ali Zardari, instituted the GIDC in November 2011.

Copyright Business Recorder, 2023