Fertiliser industry withholds GIDC payment worth billions

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ISLAMABAD: Though the fertilizer industry has been charging farmers with Rs405 per bag under the head Gas Infrastructure Development Cess (GIDC), however, the industry had not been paying GIDC to the government since October 2016, it was learnt on Sunday.

Sources in the ministry of industries and production informed Pakistan Today that the fertilizer industry has been charging farmers with Rs405 under the head GIDC over the sale of each bag of urea.

They said that the industry has so far collected approximately Rs35 billion from the farmers but have still not paid GIDC to the government. They said the owners of fertilizer plants have withheld this amount in the company’s bank accounts since October 2016 and they are reaping benefits from the amount withheld.

Farmers are continuously being charged worth Rs405 per bag on account of GIDC but the owners of fertilizer plants including Engro fertilizer and Fatima fertilizer have not deposited the amount worth Rs35 billion with the national exchequer due to a stay order, informed sources.

They added that Engro fertilizer has withheld heavy amounts in comparison to the withheld amounts of rest of the fertilizer manufacturers.

A representative of Engro fertilizer, in response to questions pertaining to GIDC said, “the amount withheld is Rs13 billion, and not Rs30 billion because legally they (the government) cannot charge GIDC on our new gas plant”.

Engro fertilizer’s representative, responding to questions put forth by Pakistan Today also said, “Most of the 400/bag impact has been absorbed by the industry and not passed on to the farmer”.

It further said, “the international price of urea is $346/ton (latest TCP tender) translating to over Rs2,700 per bag as compared to the Rs1700 local price. Gas price benefit by the government is only Rs350 per bag so we (Engro) are still selling Rs650/ bag, (more than Rs1000) lower than what we should”.

When asked why the company has not deposited the collected GIDC amount to the national exchequer, Engro’s representative said, “GIDC stay is by all industries and not not just the fertilizer industry. And, Engro has yet paid the amount becuase of the stay taken by the whole industry, and not just this (fertilizer) industry”.

“We will pay if the case is decided against us,” the representative added.

A copy of the document from the ministry of industries and production, available with Pakistan Today, discloses details of expenditure for production of one bag of urea.

According to documents, the cost of one bag of urea includes the cost of gas amounting to Rs456, GIDC for Rs405/bag, GST for Rs34/bag, other expenses such as distribution packing, depreciation etc for Rs388 per bag. Total expenditures being incurred on each bag of urea is Rs1283 while the ex-factory price of urea is from Rs1740 to Rs1760 per bag.

“GIDC is charged by the fertilizer industry but not paid to the government since Octobe, 2016 due to a stay order,” said document.

It is worth mentioning that the GIDC Act 2015 passed by the National Assembly, states that the revenues generated through the ‘Cess’ shall be utilised by the government for the development of gas infrastructure, which includes major trans-national projects and LNG imports, etc.

However, there is nothing in sight in this regard and the fertiliser manufacturers are not going to benefit from the new infrastructure. The Ministry of Energy, Sui Northern Gas Pipelines Limited (SNGPL) and Sui Southern Gas Pipelines Limited (SSGCL) are depending on bank borrowing for new gas schemes in southern and northern regions.

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