Gas consumers: Senate body approves infrastructure tax
Opposition termed bill a ‘bombshell’ that will increase tariffs by 14% to 96%/.
ISLAMABAD:
A Senate panel on Thursday cleared the Gas Infrastructure Development Cess bill, paving the way for the government to impose the tax in the range of 14 to 96 per cent on gas consumers, which will yield revenues of Rs34 billion. However, opposition legislatures described the move as a “bombshell” on consumers and equivalent to a “mini-budget”.
The Senate Standing Committee on Finance and Revenue, headed by MQM’s Senator Ahmad Ali, approved the bill with a majority vote. Though senators from Jamaat-e-Islami and Pakistan Muslim League-Nawaz opposed the bill, terming it “against the constitution”, the only dissenting voice at the end of the day was of Senator Safdar Abbasi of the ruling party.
The senators said the government not only bypassed the cabinet and tabled the bill without its consent, but also restricted the Senate to a mere recommending body by introducing the bill as a money bill.
Petroleum Minister Dr Asim Hussain said the government will impose the cess to raise money for building infrastructure for import of gas under Iran-Pakistan and Turkmenistan-Afghanistan-Pakistan and India gas pipelines. He said the money would also be utilised to subsidise imported expensive alternative fuels.
“In the name of development, the government will charge the cess to bridge cross-subsidy and the money will also be used for extravagance,” said Senator Ishaq Dar of PML(N). He said the finance ministry has already “eaten up” Rs57 billion of Workers Welfare Fund.
Actual cess rate was not disclosed in the bill. The senators asked the government to respect parliament’s right to impose a tax or surcharge at whatever rates it desires – a demand opposed by the secretary finance.
The petroleum ministry gave a presentation on the rates it intends to apply, according to which, a cess of Rs102 will be imposed on every million British thermal unit (mmbtu) of gas consumed by the fertiliser sector. This would push gas prices up by 96 per cent, giving revenues of Rs11 billion to the government.
On CNG consumers, the proposed cess is Rs140 per mmbtu for Region-I consumers, which will increase gas prices by 25 per cent and generate revenues of Rs6.2 billion. For Region-II consumers, the cess rate is 79 per cent which will push up prices by 13.8 per cent. It will fetch revenues of Rs5.2 billion.
For industrial consumers, the proposed rate is Rs13 per mmbtu. After that, gas prices will rise three per cent and yield revenues of Rs4.6 billion.
Gas supplied to independent power producers (IPPs) will be subject to a tax rate of Rs70 per unit, an increase of 18.6 per cent which will give the government Rs5.8 billion in revenues.
“It is another bombshell the government will drop on the consumers and it is a mini-budget that too without the consent of cabinet,” said Senator Ishaq Dar.
Contesting the revenue estimate of Rs34 billion, he said net collection would be Rs28 billion as IPPs would pass on the increase to end consumers.
“Electricity consumers will pay the IPPs but the increase in prices will be marginal,” said Secretary Finance Dr Waqar Masood.
Senator Safdar Abbasi of PPP said the government bypassed the cabinet and even set aside the Constitution to meet its objectives. “The prime minister is using Senate as a rubber stamp body,” he said.
The Senate committee also approved Petroleum Levy Amendment Act 2011 which would eventually give vast powers to the finance ministry to change levy rates on petroleum products and include any product in the list without seeking permission of parliament.
Published in The Express Tribune, November 4th, 2011.
A Senate panel on Thursday cleared the Gas Infrastructure Development Cess bill, paving the way for the government to impose the tax in the range of 14 to 96 per cent on gas consumers, which will yield revenues of Rs34 billion. However, opposition legislatures described the move as a “bombshell” on consumers and equivalent to a “mini-budget”.
The Senate Standing Committee on Finance and Revenue, headed by MQM’s Senator Ahmad Ali, approved the bill with a majority vote. Though senators from Jamaat-e-Islami and Pakistan Muslim League-Nawaz opposed the bill, terming it “against the constitution”, the only dissenting voice at the end of the day was of Senator Safdar Abbasi of the ruling party.
The senators said the government not only bypassed the cabinet and tabled the bill without its consent, but also restricted the Senate to a mere recommending body by introducing the bill as a money bill.
Petroleum Minister Dr Asim Hussain said the government will impose the cess to raise money for building infrastructure for import of gas under Iran-Pakistan and Turkmenistan-Afghanistan-Pakistan and India gas pipelines. He said the money would also be utilised to subsidise imported expensive alternative fuels.
“In the name of development, the government will charge the cess to bridge cross-subsidy and the money will also be used for extravagance,” said Senator Ishaq Dar of PML(N). He said the finance ministry has already “eaten up” Rs57 billion of Workers Welfare Fund.
Actual cess rate was not disclosed in the bill. The senators asked the government to respect parliament’s right to impose a tax or surcharge at whatever rates it desires – a demand opposed by the secretary finance.
The petroleum ministry gave a presentation on the rates it intends to apply, according to which, a cess of Rs102 will be imposed on every million British thermal unit (mmbtu) of gas consumed by the fertiliser sector. This would push gas prices up by 96 per cent, giving revenues of Rs11 billion to the government.
On CNG consumers, the proposed cess is Rs140 per mmbtu for Region-I consumers, which will increase gas prices by 25 per cent and generate revenues of Rs6.2 billion. For Region-II consumers, the cess rate is 79 per cent which will push up prices by 13.8 per cent. It will fetch revenues of Rs5.2 billion.
For industrial consumers, the proposed rate is Rs13 per mmbtu. After that, gas prices will rise three per cent and yield revenues of Rs4.6 billion.
Gas supplied to independent power producers (IPPs) will be subject to a tax rate of Rs70 per unit, an increase of 18.6 per cent which will give the government Rs5.8 billion in revenues.
“It is another bombshell the government will drop on the consumers and it is a mini-budget that too without the consent of cabinet,” said Senator Ishaq Dar.
Contesting the revenue estimate of Rs34 billion, he said net collection would be Rs28 billion as IPPs would pass on the increase to end consumers.
“Electricity consumers will pay the IPPs but the increase in prices will be marginal,” said Secretary Finance Dr Waqar Masood.
Senator Safdar Abbasi of PPP said the government bypassed the cabinet and even set aside the Constitution to meet its objectives. “The prime minister is using Senate as a rubber stamp body,” he said.
The Senate committee also approved Petroleum Levy Amendment Act 2011 which would eventually give vast powers to the finance ministry to change levy rates on petroleum products and include any product in the list without seeking permission of parliament.
Published in The Express Tribune, November 4th, 2011.