SHC bars collecting GIDC from two firms

Restrains collection from fertiliser units set up on guaranteed supply till next hearing

KARACHI:

A court of law has barred the government from recovering Gas Infrastructure Development Cess’s (GIDC) dues worth billions of rupees from fertiliser manufacturing units set up on guaranteed supply of gas at a fixed price for 20 years.

“Till the next date of hearing, defendants are restrained to take any coercive action against the plaintiff on collecting GIDC on feed stock gas (raw material for fertiliser making) supply to the plaintiff under the Gas Sale Purchase Agreement dated April 11, 2007,” Sindh High Court (SHC) said in its stay order of September 10.

The court is scheduled for the next hearing on September 29. A leading analyst recalled that two fertiliser making units namely Engro Enven and Fatima Fertilizer were set up on guaranteed supply of feed stock gas at a fixed price of $0.7 per mmbtu.

The other fertiliser manufacturing units, including Engro’s old fertiliser making unit and others are subject to pay GIDC dues and that is why they are in negotiations with the government to expand the time period for the payment to over 10 years from two years at present.

The government has estimated to recover Rs180.3 billion from fertiliser manufacturers on account of GIDC, which they had collected from farmers through sales of fertilisers in the past but did not pay to the government.

“Since the defendants have given a sovereign guarantee that they would not impose any fee on the fixed price of $0.77 per mmbtu for feed stock gas supplied under the Fertilizer Policy 2001 and Gas Sale Purchase Agreement dated April 11, 2007, GIDC cannot be imposed on or collected from the plaintiff on the supply of this gas, which is inclusive of all duties, taxes and fees they cannot be asked to pay anything over and above this amount and any claim exceeding this amount is illegal and unlawful,” fertiliser manufacturers’ counsel submitted before SHC.

The fertiliser manufacturer’s counsel has challenged the imposition of GIDC on the gas supplied to it by the government under the fixed price gas sale and purchase agreement. He contended that the government in order to encourage investment in new fertiliser plants announced the Fertilizer Policy 2001 in which it guaranteed that feed stock gas (which is a raw material) to new plants would be provided at a fixed price of $1.70 per mmbtu, inclusive of all taxes, fees, etc.

He further contended that on the basis of the 2001 policy the federal government floated an international tender in 2006 to allocate 100mmcfd of gas for a period of 20 years at a fixed price specified in the Policy 2001 for establishing a new fertiliser plant.

“Plaintiff won the tender and entered into a GSPA…and has invested over $1.1 billion (by Engro Enven) to establish a state-of-the-art fertiliser plant,” counsel contended before the court.

 

Published in The Express Tribune, September 13^th, 2020

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