GIDC payment to hit Pakistan's farmers

The government has asked the fertiliser industry to pay gas infrastructure development cess (GIDC) within 24 months while industry experts believe that the decision will badly affect farmers as urea prices may rise significantly.

Talking to a group of journalists, Fertiliser Manufacturers of Pakistan Advisory Council (FMPAC) Executive Director Brigadier (Retd) Sher Shah Malik said the fertiliser industry was making efforts to come up with a workable solution but the government was refuting proposals which stakeholders had put forward.

He warned that with the legal battle continuing, it was evident that if the court’s decision was implemented directly and no relief was offered, the industry would face serious consequences and Pakistan’s food security would face collateral damage.

“The Supreme Court’s decision also binds the government to cough up Rs295 billion and make considerable progress on gas infrastructure projects over the next six months,” he said.

According to the industry, it has requested the government to first utilise the already collected GIDC of more than Rs295 billion on the proposed gas infrastructure development but apparently the funds collected by previous governments have been utilised elsewhere and are no longer available.

The government has accused the industry of having high profit margins, however, Malik termed it an incorrect statement. “Actual profitability margins of the industry may be verified from websites of fertiliser manufacturing companies, which are not as high as being claimed by the government,” he added.

The industry was being unjustly accused of having a higher return on equity (ROE), he said. “ROE is based on historical equity which if invested in financial instruments would have been worth more,” he added.

The fertiliser body also rejected the government’s claim that the industry had collected billions of rupees from customers and the same was reflected in their financial statements.

The association office-bearers said the fact of the matter was that the financial statements only reflected the amount accrued as payable and did not state that it had been collected from the customers.

The fertiliser industry has contributed a significant portion of around 43% of the total collection of Rs295 billion by the government up to the period when further payment was stayed by courts of law.

“With a population growth rate of 2%, we are going to have 50% additional population to feed by 2040,” Malik pointed out.