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Pakistan considers gradual increase in GIDC

Publication Date : 17-06-2014

 

The government is considering a gradual increase in the Gas Infrastructure Development Cess (GIDC) rates instead of 200 per cent it earlier sought through the Finance Bill 2014-15.

The move comes at a time when finance minister Ishaq Dar is set to wind up the debate on next year’s federal budget in the National Assembly.

A government official on Monday told Dawn that the government would be securing parliamentary approval to have powers for increasing GIDC rates on all non-domestic consumers at a time of its choice.

This would not mean increasing GIDC rates from 100 Pakistani rupee (US$1) per mmBtu to Rs300 Pakistani rupee ($3) mmBtu immediately after the approval of the Finance Bill 2014-15 later this month, he explained.

Under the Finance Bill 2014-15, the government proposed increasing gas rates for industrial, commercial, fertiliser and captive power plants through GIDC to generate 145 billion Pakistani rupee ($1.47 billion) next year instead of 88 billion Pakistani rupee ($892.5 million) this year.

For this to achieve, the GIDC rates on all gas consumers, except residential were proposed to be increased by up to 200 per cent to meet a commitment made with the International Monetary Fund.

The GIDC rates are required to be increased from 100 Pakistani rupee ($1) per mmBtu to 300 Pakistani rupee ($3) for captive power plants, fertiliser, Wapda and independent power plants, commercial consumers including ice factories and industrial consumers.

The rates for CNG stations were proposed to be increased from 263 Pakistani rupee ($2.67) per mmBtu to 300 Pakistani rupee ($3) per mmBtu.

The official, however, said these maximum rates would be achieved gradually to avoid a sudden jump in inflation arising out of input costs of all sectors and resultant political opposition at a time when the government requires maximum support because of a military operation in the tribal region.

Giving an example, the official explained that the government had got powers from the parliament a few years ago for maximum rates of petroleum levy on various petroleum products but it took more than three years for the previous government to charge maximum rates to consumers.

Even then the petroleum levy was sometimes adjusted to absorb the impact of change in international oil prices.

The opposition parties and provincial governments, particularly of Sindh and Khyber Pakhtunkhwa, have already opposed not only the imposition of GIDC for allegedly being in violation of the Constitution but also for its impact on consumers.

Sindh chief minister Syed Qaim Ali Shah had even gone to the extent of demanding the transfer of GIDC so far collected by the federal government to the provinces saying that GIDC imposition by the centre violated Articles 161 and 162 of the Constitution.

The official said the finance minister would respond to criticism from opposition parties over budgetary proposals and make a few revenue-neutral adjustments on the recommendations of the members of the two houses of the parliament.

This would be followed up with cut motions by opposition members, supplementary grants by the government and approval of ministry-wise ceilings for current expenditure and then charged expenditure for the entire federal government including various organs of the state.

He said the approval of the finance bill by the national assembly to provide for legal cover to taxation measures was expected early next week.

The senate standing committee on finance and revenue had also raised critical questions and opposed imposition of the GIDC.

The government will also be seeking approval for an unprecedented supplementary expenditure of about 5.677 trillion Pakistani rupee ($57.5 billion) for the current fiscal year because of huge expenditure overruns, diversions and higher than budgeted debt servicing.

According to budgetary documents placed before the parliament, an extraordinary 4.73 trillion Pakistani rupee ($47.3 billion) worth of regular supplementary grants are being sought for appropriation which have an additional burden on the budget.

Last year, the government had got approved from the parliament a supplementary budget of 1.44 trillion Pakistani rupee ($14.4 billion) – which meant the reappropriations of funds and supplementary grants have increased by three times in just one year.

“Supplementary demands for grants and appropriations” tabled before the parliament suggest that the largest chunk of  4.667 trillion Pakistani rupee ($46.7 billion) would be rolled over for repayment of domestic debt as regular supplementary grant.

Another 44 billion Pakistani rupee ($446.3 million) supplementary grant for the current year pertains to servicing of domestic debt and another 16.9 billion Pakistani rupee ($170.4 million) for other additional expenditures.

 

 

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