ISLAMABAD:
As the government imposes Gas Infrastructure Development Cess on the remaining two fertiliser plants, the owners of these plants have demanded its withdrawal, terming the levy against the fertiliser policy.
The issue of levying GIDC was raised by Arif Habib – the industrial tycoon and Chief Executive of Fatima Fertilizers – during a meeting with Finance Minister Ishaq Dar, according to officials of the Ministry of Finance. Habib’s unit, Fatima Fertilizers, has been affected by the government’s decision, along with Engro Fertilizers, which is owned by another billionaire, Hussain Dawood.
The officials said Habib wanted the government to take back its decision, as his fertiliser plant, which is established under the 2001 fertiliser policy, was protected from any new taxation for a fixed period in his view. The government has imposed the GIDC on all types of fertiliser plants from this month.
It imposed Rs300 per million British thermal unit (mmbtu) GIDC on supply of feed gas to all fertiliser plants. According to industry people, the fertiliser companies would not be in a position to pass on the impact since global urea prices are lower than the prevailing local prices.
The owners of the two fertiliser plants were demanding the government to respect the 2001 fertiliser policy that ensures protection against any new taxation, said Shahab Khawaja, the executive director of Fertilizer Manufacturers Pakistan Advisory Council. He said under the 2001 policy the government should reverse its decision.
The government’s decision to bring the new fertiliser plants in the ambit of GIDC was in line with the Competition Commission of Pakistan’s policy advice. The CCP had recommended the government to levy GIDC on all fertiliser plants irrespective of whether the plant is set up before or after 2001, aimed at creating a level playing field in the urea market.
According to the Ministry of Finance, Habib demanded that the government should fulfill its commitments and supply gas to the plants, as his other plant Pak-Arab Fertilizer Plant was affected by the gas curtailment.
The four fertiliser plants which are on the system of Sui Northern Gas Pipelines Limited are not receiving assured supplies of gas, said Khawaja.
Habib urged that the SNGPL should be directed to fulfill its commitment to provide gas to the fertiliser industry, said the Finance Ministry.
He also demanded allocation of unutilised gas and gas from new discoveries to the fertiliser industry, terming it vital for agriculture growth in the country.
Habib said that the local industry was providing fertiliser to farmers up to 50% below import price. He said that due to gas shortages and curtailment the local production was below the demand.
However, the finance minister said that field-wise status of gas supply must be evaluated and if there was additional gas which was not being utilised then cost benefit analysis of bringing that gas into the system and supply to fertiliser industry should be explored. He said that due to peak demand of electricity in summer season, priority is given to the energy sector, highlighting his government’s inability to supply gas to the fertiliser sector.
Dar said the government was working on a strategy to enhance exploration of hydrocarbons. “If anyone has an out-of-the-box solution to meet the growing natural gas demands the government will give serious thought to it,” he said.
He, however, assured the delegation that the government will work for facilitating the fertiliser industry in order to provide quality fertiliser at less costs to the farmers. He said that the strategy of agriculture credit and provision of inputs at less costs will benefit the farmers and lead to growth in this sector.
Published in The Express Tribune, July 17th, 2014.
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