ISLAMABAD: The Petr-oleum Division is yet to finalise a mechanism to recover Rs400 billion of Gas Infrastructure Development Cess (GIDC) from the industry in the light of Supreme Court's decision.
Informed sources told Business Recorder the previous government collected Rs295 billion and used it in budgetary support, which implies that the incumbent government has to spend Rs295 billion from its future tax collections.
Currently, accrued Rs517 billion as on March 31, 2020 to be paid in 24 installments, of which Rs195 billion will be paid by fertilizer sector, since they have provisions for most of it.
Power sector has to pay Rs76 billions, Gencos, KE, IPPs will pay since it is a pass-through. Captive power/CNG/industry have to pay Rs246 billion.
Petroleum Division was of the view that while the government may not have to spend the entire amount of Rs818 billion, it needs to spend a substantial part of it to justify the collection.
The apex court has given the government six months to start at least the first project (North South Pipeline), failing which the GIDC Act will be considered invalid forever.
The sources said there was a proposal to finalise North South Pipeline Project and start work on it in six months through creation of a joint venture (JV) with Russian consortium and retain 51-80 per cent equity.
It was also proposed the need for funding a large portion of the debt portion from the GIDC funds. The Petroleum Division has proposed that "let the Russian companies be EPM contractors and pipe/compressor suppliers, whereas, Pakistani companies be subcontractors for construction works".
It was also being considered to reach a commercial agreement (joint venture) with Russian consortium within 30 days but no guarantee would be provided for throughput and Start Right of Way (RoW) and land acquisition rightway.
With little capital to be paid back, the transportation charge will be a minimal number, which helps in lowering the delivered gas cost.
The Petroleum Division has asked the following questions from the Law Division; (i) if we cannot start North South Pipeline in six months does that jeopardize the collection for the remaining 18 installments in any way?; (ii) Can we add other gas infrastructure projects or is it only specified one?; (iii) If we cannot spend the full amount in a few years, do we have to refund it to the consumers? What is reasonable cut-off date? (iv) If a consumer has shut down, how do we recover the amount? and; (v) If industry wants more time to pay, can we extend the time, and if so, do we have to do it for all consumers.
The affected industry has urged the federal government to review the payment mechanism as the industry is unable to pay the outstanding amount.
Copyright Business Recorder, 2020