The federal government has notified to waive off almost entire Gas Infrastructure Development Cess (GIDC) on gas consumed by fertilizer manufacturers to provide relief to the farmers.
The Ministry of Energy (Petroleum Division) in this regard issued a notification stated that the federal cabinet approved reduction in GIDC on gas consumed by fertilizer manufacturers to Rs 5/ mmbtu so that this benefit could be passed on to the farmers. After relief in GIDC, the urea bag’s price has reduced to Rs 400 and would be sold at Rs 2, 040.
The notification was forwarded to managing directors of SNGPL, SSGCL, Mari Petroleum Company Ltd, Pakistan Petroleum Ltd, Oil and Gas Development Company Ltd and Tullow Pakistan (Development) Ltd.
Notably, in August 2019, the Pakistan Tehreek-e-Insaf (PTI) government introduced the GIDC Amendment Act 2019 in order to settle GIDC dues, by waiving 50%, but withdrew it later due to public pressure.
The PTI government increased urea prices approximately by Rs210 per bag due to a rise in gas prices in July 2019 in order to meet pre-conditions for the IMF programme.
In the current scenario, any gas price hike for the fertiliser sector will increase the cost for the farmers given the inflationary pressure. The cost of living is surging while farmers’ income is declining due to lower yields of major cash crops, as was evident from cotton and rice harvests.
Industry officials say that the government, in its effort to appease farmers, has decided to reduce GIDC, claiming impact of around Rs400 per bag of urea. However, the benefit is less likely to reach farmers considering the rumours of gas price increase in the offing. Amid reports of increasing gas prices, reduction in GIDC is likely to have only impact of only Rs120 per bag impact on urea prices.
Earlier, the government had imposed GIDC amounting to Rs 300 per mmbtu and Rs 150 per mmbtu on feed stock and fuel stock consumed by fertiliser manufacturers, respectively through the GIDC Act 2015. Now, the GIDC rate has been reduced from Rs 400 to Rs 5 per bag.
