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PTI govt defends Rs208b waiver for industrialists
By Zafar Bhutta
Published: September 2, 2019
TWEET EMAIL
ISLAMABAD: The government on Monday tried to justify a waiver of over Rs200 billion for business tycoons saying it was not a ‘free lunch’ and that the move was taken ‘in the best interest’ of the nation.
The Pakistan Tehreek-e-Insaf (PTI) government on August 30 waived Rs208 billion worth of liabilities of a few industrialists in addition to writing off late payment surcharge for the past seven years through a presidential ordinance, bringing into dispute its claim of a clean government.
President Arif Alvi promulgated the Gas Infrastructure Development Cess (Amendment) Ordinance 2019 to waive half of the outstanding liabilities of fertiliser, textile, power generation, and compressed natural gas (CNG) sectors. The ordinance was published in the official gazette on last Wednesday.
Through the presidential ordinance, the government also reduced GIDC rates by up to 75%, which would push down prices of gas and fertiliser for the end-consumers. The life span of a presidential ordinance is four months, which can be extended for another four months.
Addressing a press conference along with Adviser to Prime Minister on Petroleum Nadeem Babar, Minister of Petroleum Omar Ayub called the move ‘a big success’, adding that it is not a free lunch.
“The government would conduct a forensic audit of fertilizer plants to assess how much money on account of GIDC they have received from the farmers,” he said.
Nadeem Babar said export-oriented sectors are being exempted from the new rate of 50 per cent GIDC. New fertiliser plants have also been exempted from the GIDC.
“New fertiliser plants had obtained a stay order from the court saying the GIDC was not applicable to them under a policy. The cess was imposed to recover money to set up the infrastructure of imported gas.”
He said the money collected under this head had been used for budgetary support and therefore different courts had given stay order against recovery of the GIDC.
“Collection of the GIDC was 15 per cent during last eight years whereas 85 per cent recovery was not being made due to stay orders obtained from courts,” he added.
He said the last Pakistan Muslim League-Nawaz (PML-N) government had also approved the GIDC Act from the parliament enabling the CNG sector to pay 50 per cent outstanding amount. “This process had been continued following consultation with different industries,” he added.
He also ruled out any benefits being given to different business groups. “The GIDC rate was high and this is being reduced by 50 per cent,” he said.
Omar Ayub said the government was collecting now Rs15 billion GIDC and the new move would enable it to collect Rs42 billion every year following a settlement under the GIDC Ordinance.
Regarding higher profits made by the independent power producers (IPPs), he said the government has formed a committee to analyse the profits and agreements with the IPPs. “This committee would also assess the heat rate and energy audit of the IPPs,” he said.
The major beneficiary of the ordinance is fertilizer sector as the government has waived Rs65 billion outstanding against new fertilizer plants saying they were not liable to pay the GIDC under agreements signed by the last Pakistan People Party (PPP) government. However, these new fertiliser plants had already charged the cess from the farmers as they raised the prices of urea.
Under the ordinance, the government has penalized sectors like small industries that have continued paying this tax for the last eight years. However, the government has waived over Rs200 billion outstanding those who had not paid the GIDC and obtained stay orders from courts,
Out of total Rs417 billion, old fertilizer plants have to pay Rs71 billion, new fertilizer plants Rs65 billion, general industries Rs43 billion, IPPs Rs10 billion, KE Rs34 billion, Wapda Gencos Rs30 billion and CNG TRs Rs78 billion. The new fertilizer plants would not pay the GIDC whereas other sectors could avail the schemes, waiving 50 per cent outstanding dues.
Rs210bn GIDC write-off is ‘no free lunch’, says Omar
Khaleeq KianiUpdated September 03, 2019
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“It is not a free lunch to fertiliser or any other sector,” said Energy Minister Omar Ayub Khan at a hurriedly called joint news conference with Special Assistant to Prime Minister on Petroleum Nadeem Babar who said the GIDC waiver ordinance was drawn up on the pattern of GIDC (Amendment) Act introduced by the PML-N government for a similar settlement with the CNG sector. — Photo courtesy Omar Ayub Twitter/File
ISLAMABAD: The government on Monday defended its decision to write off about Rs210 billion to big businesses out of their outstanding Rs420bn bills on account of Gas Infrastructure Development Cess (GIDC), saying it gave up ‘uncertain’ past bills to secure a lower but more certain future revenue stream.
“It is not a free lunch to fertiliser or any other sector,” said Energy Minister Omar Ayub Khan at a hurriedly called joint news conference with Special Assistant to Prime Minister on Petroleum Nadeem Babar who said the GIDC waiver ordinance was drawn up on the pattern of GIDC (Amendment) Act introduced by the PML-N government for a similar settlement with the CNG sector.
The minister said the fertiliser industry will have to submit to a forensic audit to determine if it had collected GIDC from farmers, and if so, to what extent and would have to refund such amounts to the farmers through future price adjustment or surrender these amounts to the government treasury.
“All industries that are part of the GIDC and contesting cases in courts would have to formally sign settlement agreements to withdraw their cases from the courts, pay 50pc of past arrears within 90 days upfront and avail half of GIDC rate in future,” Ayub said, adding that those who opt not to avail the option will be free to pursue court cases but they would not be entitled to lower rates once the cases are adjudicated.
ARTICLE CONTINUES AFTER AD
Agreement is handiwork of Asad Umar and Razak Dawood
Babar said some quarters were creating a wrong perception that the government had opted for Rs210bn for Rs420bn even though an amount of Rs147bn collected between 2011 and 2014 had been declared ultra vires of the constitution by the Supreme Court of Pakistan. As such, an amount of Rs273bn was uncertain because of subsequent stay orders in various high courts and observations of judges.
“Therefore, we have brought to an end an uncertainty about Rs273bn by ensuring an expected recovery of Rs210bn besides streamlining a future revenue flow,” said Babar, adding the government was actually getting no more than 15pc of total bills and 85pc was piling up as arrears whose recovery was subject to judgments by the courts that may take 8-10 years and no surety in which direction these decisions may go.
“We have made sure that the government collects Rs42bn per year instead of just Rs15bn,” he said, adding the government believed the previous GIDC rates were on the higher side and needed to be rationalised.
Interestingly, the government last year collected Rs25bn against a target of Rs100bn and set a target of Rs30bn for 2019-20. He said he [Babar] and Omar Ayub were not part of the talks with industry that led to the current agreement, but former finance minister Asad Umar and Commerce Advisor Abdul Razak Dawood held detailed interactions and finalized the agreement and the ordinance.
Fatima and Engro Fertilizer had outstanding amount of Rs65bn, so they will now be required to pay Rs32bn. He said the current government believed they should not have been subjected to GIDC as they had been given fixed gas rates for 10 years by the PPP government and two years out of this period still remained.
Babar gave a break up of total Rs417bn arrears excluding Rs147bn. He said old fertiliser plants have to pay Rs71bn and will now be paying Rs35bn while new fertilizer plants (Engro and Fatima) had Rs 65bn and they will now pay Rs32bn to ensure that they get lower rate when their 10 year protected period comes to an end.
An amount of Rs43bn was outstanding against general industry who would now pay about Rs21bn. Likewise amount of Rs10bn was pending against IPPs, Rs34bn against K-Electric, Rs30bn against Wapda Gencos and Rs78bn against CNG sector. The IPPs will now pay Rs5bn, KE Rs17bn, Gencos Rs15bn and CNG sector Rs37bn.
He said the recovery from CNG could not be refunded to the consumers because too many people were involved, but this amount could be deposited with the government. He explained that funds outstanding against IPPs or other power plants were not pending with investors or companies because full costs were a pass through item approved by the regulator and could be adjusted only through regulatory mechanism.
Published in Dawn, September 3rd, 2019
By Zafar Bhutta
Published: September 2, 2019
TWEET EMAIL
ISLAMABAD: The government on Monday tried to justify a waiver of over Rs200 billion for business tycoons saying it was not a ‘free lunch’ and that the move was taken ‘in the best interest’ of the nation.
The Pakistan Tehreek-e-Insaf (PTI) government on August 30 waived Rs208 billion worth of liabilities of a few industrialists in addition to writing off late payment surcharge for the past seven years through a presidential ordinance, bringing into dispute its claim of a clean government.
President Arif Alvi promulgated the Gas Infrastructure Development Cess (Amendment) Ordinance 2019 to waive half of the outstanding liabilities of fertiliser, textile, power generation, and compressed natural gas (CNG) sectors. The ordinance was published in the official gazette on last Wednesday.
Through the presidential ordinance, the government also reduced GIDC rates by up to 75%, which would push down prices of gas and fertiliser for the end-consumers. The life span of a presidential ordinance is four months, which can be extended for another four months.
Addressing a press conference along with Adviser to Prime Minister on Petroleum Nadeem Babar, Minister of Petroleum Omar Ayub called the move ‘a big success’, adding that it is not a free lunch.
“The government would conduct a forensic audit of fertilizer plants to assess how much money on account of GIDC they have received from the farmers,” he said.
Nadeem Babar said export-oriented sectors are being exempted from the new rate of 50 per cent GIDC. New fertiliser plants have also been exempted from the GIDC.
“New fertiliser plants had obtained a stay order from the court saying the GIDC was not applicable to them under a policy. The cess was imposed to recover money to set up the infrastructure of imported gas.”
He said the money collected under this head had been used for budgetary support and therefore different courts had given stay order against recovery of the GIDC.
“Collection of the GIDC was 15 per cent during last eight years whereas 85 per cent recovery was not being made due to stay orders obtained from courts,” he added.
He said the last Pakistan Muslim League-Nawaz (PML-N) government had also approved the GIDC Act from the parliament enabling the CNG sector to pay 50 per cent outstanding amount. “This process had been continued following consultation with different industries,” he added.
He also ruled out any benefits being given to different business groups. “The GIDC rate was high and this is being reduced by 50 per cent,” he said.
Omar Ayub said the government was collecting now Rs15 billion GIDC and the new move would enable it to collect Rs42 billion every year following a settlement under the GIDC Ordinance.
Regarding higher profits made by the independent power producers (IPPs), he said the government has formed a committee to analyse the profits and agreements with the IPPs. “This committee would also assess the heat rate and energy audit of the IPPs,” he said.
The major beneficiary of the ordinance is fertilizer sector as the government has waived Rs65 billion outstanding against new fertilizer plants saying they were not liable to pay the GIDC under agreements signed by the last Pakistan People Party (PPP) government. However, these new fertiliser plants had already charged the cess from the farmers as they raised the prices of urea.
Under the ordinance, the government has penalized sectors like small industries that have continued paying this tax for the last eight years. However, the government has waived over Rs200 billion outstanding those who had not paid the GIDC and obtained stay orders from courts,
Out of total Rs417 billion, old fertilizer plants have to pay Rs71 billion, new fertilizer plants Rs65 billion, general industries Rs43 billion, IPPs Rs10 billion, KE Rs34 billion, Wapda Gencos Rs30 billion and CNG TRs Rs78 billion. The new fertilizer plants would not pay the GIDC whereas other sectors could avail the schemes, waiving 50 per cent outstanding dues.
Rs210bn GIDC write-off is ‘no free lunch’, says Omar
Khaleeq KianiUpdated September 03, 2019
Facebook Count76
Twitter Share
21
“It is not a free lunch to fertiliser or any other sector,” said Energy Minister Omar Ayub Khan at a hurriedly called joint news conference with Special Assistant to Prime Minister on Petroleum Nadeem Babar who said the GIDC waiver ordinance was drawn up on the pattern of GIDC (Amendment) Act introduced by the PML-N government for a similar settlement with the CNG sector. — Photo courtesy Omar Ayub Twitter/File
ISLAMABAD: The government on Monday defended its decision to write off about Rs210 billion to big businesses out of their outstanding Rs420bn bills on account of Gas Infrastructure Development Cess (GIDC), saying it gave up ‘uncertain’ past bills to secure a lower but more certain future revenue stream.
“It is not a free lunch to fertiliser or any other sector,” said Energy Minister Omar Ayub Khan at a hurriedly called joint news conference with Special Assistant to Prime Minister on Petroleum Nadeem Babar who said the GIDC waiver ordinance was drawn up on the pattern of GIDC (Amendment) Act introduced by the PML-N government for a similar settlement with the CNG sector.
The minister said the fertiliser industry will have to submit to a forensic audit to determine if it had collected GIDC from farmers, and if so, to what extent and would have to refund such amounts to the farmers through future price adjustment or surrender these amounts to the government treasury.
“All industries that are part of the GIDC and contesting cases in courts would have to formally sign settlement agreements to withdraw their cases from the courts, pay 50pc of past arrears within 90 days upfront and avail half of GIDC rate in future,” Ayub said, adding that those who opt not to avail the option will be free to pursue court cases but they would not be entitled to lower rates once the cases are adjudicated.
ARTICLE CONTINUES AFTER AD
Agreement is handiwork of Asad Umar and Razak Dawood
Babar said some quarters were creating a wrong perception that the government had opted for Rs210bn for Rs420bn even though an amount of Rs147bn collected between 2011 and 2014 had been declared ultra vires of the constitution by the Supreme Court of Pakistan. As such, an amount of Rs273bn was uncertain because of subsequent stay orders in various high courts and observations of judges.
“Therefore, we have brought to an end an uncertainty about Rs273bn by ensuring an expected recovery of Rs210bn besides streamlining a future revenue flow,” said Babar, adding the government was actually getting no more than 15pc of total bills and 85pc was piling up as arrears whose recovery was subject to judgments by the courts that may take 8-10 years and no surety in which direction these decisions may go.
“We have made sure that the government collects Rs42bn per year instead of just Rs15bn,” he said, adding the government believed the previous GIDC rates were on the higher side and needed to be rationalised.
Interestingly, the government last year collected Rs25bn against a target of Rs100bn and set a target of Rs30bn for 2019-20. He said he [Babar] and Omar Ayub were not part of the talks with industry that led to the current agreement, but former finance minister Asad Umar and Commerce Advisor Abdul Razak Dawood held detailed interactions and finalized the agreement and the ordinance.
Fatima and Engro Fertilizer had outstanding amount of Rs65bn, so they will now be required to pay Rs32bn. He said the current government believed they should not have been subjected to GIDC as they had been given fixed gas rates for 10 years by the PPP government and two years out of this period still remained.
Babar gave a break up of total Rs417bn arrears excluding Rs147bn. He said old fertiliser plants have to pay Rs71bn and will now be paying Rs35bn while new fertilizer plants (Engro and Fatima) had Rs 65bn and they will now pay Rs32bn to ensure that they get lower rate when their 10 year protected period comes to an end.
An amount of Rs43bn was outstanding against general industry who would now pay about Rs21bn. Likewise amount of Rs10bn was pending against IPPs, Rs34bn against K-Electric, Rs30bn against Wapda Gencos and Rs78bn against CNG sector. The IPPs will now pay Rs5bn, KE Rs17bn, Gencos Rs15bn and CNG sector Rs37bn.
He said the recovery from CNG could not be refunded to the consumers because too many people were involved, but this amount could be deposited with the government. He explained that funds outstanding against IPPs or other power plants were not pending with investors or companies because full costs were a pass through item approved by the regulator and could be adjusted only through regulatory mechanism.
Published in Dawn, September 3rd, 2019
