Iincrease in GIDC adversely affects share prices of affected industries, with textile, fertiliser stock prices falling
KARACHI: The increase in Gas Infrastructure Development Cess (GIDC) is a problem for Pakistan’s industry and for the public who has invested or bought shares in gas companies. It is sad to see that the government is solely focusing on increasing revenue collection without giving thought to how this could negatively impact the country’s industrial sector. Instead of increasing the tax net and increasing tax collection, the government is taking the easy route out and is instead targeting organisations, which have chosen to invest in Pakistan and are providing employment to thousands.
Countries all around the world provide incentives to encourage foreign and local organisations to invest. Pakistan being a negative grade investment company needs to do this now more than ever. Instead, what the government is doing is increasing operating costs, so why would anyone, local or foreign, choose to invest here? What makes the matter even worse is that many of these companies have been set up by Pakistanis who invested heavily in the textile and fertiliser sectors and have even been given assurances by the government, but unfortunately, it is very easy for powerful institutions to break their promises.
Additionally, the increase in GIDC is adversely affecting share prices of the affected industries, with textile stock prices falling and the fertiliser stock prices taking a hit of almost 10 per cent in the last few weeks. All those people who bought shares of these local companies have lost large chunks of money — for many of them, these were their savings or retirement funds which are irrecoverable. What are the people of Pakistan to do when it is becoming increasingly difficult to set up any kind of business in the country, and investing in local businesses is shaky with no guarantee of return?
There is no arguing the government’s need for revenue, and the fact that gas is already priced low in Pakistan when compared to alternative fuels. That said, there are better ways to raise gas tariffs, for instance, one that attracts more investment in exploration activities. Even the GIDC itself could mean much more if it were used for its intended purpose of building infrastructure for gas imports.
Mohammad Usama Shahid
Published in The Express Tribune, July 18th, 2014.
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