PPI Original Text (PPI-OT) – Petroleum Minister persuades Law Ministry for increasing GIDC- Alfalah Securities Limited
Karachi, May 30, 2012 (PPI-OT): Minister for Petroleum and Natural Resources, Dr. Asim Hussain has convinced the Law Ministry for increasing Gas Infrastructure Development Cess (GIDC) on five sectors i.e. on Fertilizers, General Industries, Gencos, IPPs and CNG.
According to the Alfalah Securities Limited, law Ministry had earlier refused the initiative taken by Petroleum Ministry to increase gas development cess as it termed it to be a provincial issue and stated that the Council of Common Interests (CCI) is the relevant forum for its approval. However, the Minister for Petroleum has persuaded the Law Ministry to get the summary validated and stated it to be an essential step in raising funds for laying Iran- Pakistan (IP) and TAPI (Turkmenistan Afghanistan Pakistan India) gas pipelines. An increase in GIDC, subjected to its final approval by the government, would be made a part of the Finance Bill for budget FY13 and is likely to be effective with immediate effect.
Alfalah Securities Limited believes an increase in the gas cess would bode negatively for the fertilizer sector particularly for old fertilizer plants like FFC, FFBL and Engro as they would incur increased cost of production which would hurt profitability to a considerable extent since the manufacturers have lost pricing power in raising urea prices. On the other hand, their would be no impact of an increase in GIDC for Fatima Fertilizers and Engro Enven1.3 since the new plants are provided feedstock gas at a subsidized rate (USD 0.77/mmbtu) as per the Fertilizer policy 2001. Moreover, an increase in GIDC would elevate inflation across the board as CNG prices and power tariff would be raised.