Karachi, May 29, 2012 (PPI-OT): Ministry of Law has opposed the summary seeking a rise in Gas Infrastructure Development Cess (GIDC) on gas and has recommended the matter to the Council of Common Interests (CCI) to decide.
According to Alfalah Securities Limited, the Petroleum Ministry had sought an increase in the Gas Infrastructure Development Cess (GIDC) in order to generate maximum funds from industries to finance the development of recently entered gas pipeline agreements (i.e. IP and TAPI gas pipelines) and subsidize alternate fuels.
The Ministry had proposed an increase of PkR 103/mmbtu (up by 52.3%) on feedstock gas supplies for fertilizer plants from PkR 197/mmbtu, after which the applicable cess would reach to PkR 300/mmbtu. GIDC on Compressed Natural Gas (CNG) in Region-I would be raised by PkR 159/mmbtu (up by 110.42%) to PkR 303/mmbtu from the existing cess of PkR 144/mmbtu while in Region-II, GIDC would be raised massively by PkR 121/mmbtu (up by 153%) to PkR 200/mmbtu from PkR 79/mmbtu currently. Furthermore, the ministry plans to raise GIDC on general industries by PkR 87/mmbtu to PkR 100/mmbtu from existing PkR 13/mmbtu, by PkR 73/mmbtu to PkR 100/mmbtu for KESC and GENCOs from the current cess of PkR 27/mmbtu and an increase of PkR 30/mmbtu to PkR 100/mmbtu for IPPS from the current cess of PkR 70/mmbtu.
Alfalah Securities Limited believes, the rejection of this proposal is positive for the fertilizer sector which otherwise would have to face a hit on their profitability particularly old fertilizer plants like FFC, FFBL and Engro as they would incur increased cost of production to a considerable extent. There would not have been a significant impact on Fatima Fertilizers and Engro Enven1.3 since the new plants are provided feedstock gas at a subsidized rate (USD 0.77/mmbtu) as per the Fertilizer policy 2001.