Domestic consumers may face another tough winter after successive governments failed to utilize Rs368 billion collected under the Gas Infrastructure Development Cess (GIDC) and Gas Development Surcharge (GDS) for the development of key gas conduits with regional countries.
Documents available with SAMAA TV, including an audit of the projects and other communications, showed that the government could not make due progress on building pipelines from other countries in the region to import gas. However, it did not stop the government from collecting billions from consumers in this regard.
Since the inception of the GIDC, Rs1,15.61 billion were recovered from consumers of Mari Petroleum Company Limited (MPCI), Rs97.39 billion from Sui Northern Gas Pipelines Limited (SNGPL), Rs63.63 billion from Sui Southern Gas Company Limited (SSGC), Rs30.87 billion from Oil and Gas Development Company Limited (OGDCL) and Rs30.87 billion were recovered from Pakistan Petroleum Limited (PPL).
Cess was charged at rates of around Rs100 to Rs300 per MMBTU since 2011 from consumers of different sectors, including fertilizer feed and fuel, captive power, industrial, Karachi Electric Supply Company (KESC), power generation companies (Gencos), independent power producers (IPPs) and compressed natural gas (CNG).
“Islamabad Director General (Gas) collected GIDC amounting to Rs325.12 billion up to June 30, 2021,” the report read.
Out of the total collection, the government could only utilize an amount of Rs2.81 billion on the development of gas infrastructure,“ according to the audit report.
This meant that around Rs322.30 was left unutilized.
Cess utilization law
The Gas Infrastructure Development Cess Act 2015 was enacted to ensure money collected as cess is used to develop gas infrastructure.
Section 4 (1) of the act notes that the cess shall be utilized for infrastructure development of the Iran-Pakistan Pipeline Project, Turkmenistan-Afghanistan-Pakistan-India (TAPI) pipeline project, LNG, or other ancillary projects by the federal government.
Usage of cess
It is worth noting that the Supreme Court of Pakistan, in its August 13, 2020 judgment, restrained the federal government from charging cess till the amount collected by July 31, 2020, was expended on the projects listed in section 4 of the GIDC Act, 2015.
According to the office of the Auditor General of Pakistan, poor project management resulted in the underutilization of GIDC funds which was reported to the management in August 2021.
In September 2021, the management responded to the report and said that ISGS had obtained route approval for developing the North-South Pipeline from the Ministry of Defence, and its first technical session was conducted in August 2021.
It also noted that agreements with host governments for TAPI are still being negotiated, and approval for early work on the project was in process. A draft MOU on Land Acquisition Service Agreement was also under review.
Moreover, the energy ministry sought feedback from the foreign office on the resumption of engagements for the Iran-Pakistan Gas Pipeline Project in February 2021 through a letter.
However, no response was received.
The Auditor General’s office also expressed dissatisfaction with the response, deeming it untenable since the SC had directed the federal government to take all necessary steps for the construction of the North-South, TAPI, and IP Pipelines within six months, but no progress was made.
The audit report recommended ensuring the utilization of GIDC in the development of gas infrastructure projects at the earliest. Meanwhile, an amount of Rs42.95 billion under the head of Gas Development Surcharge (GDS) is also unutilized.
No time limit had been prescribed for various companies, including PPL, MPCL, and SSGC, to pay the GDS collected from consumers, as per the document.
While talking to SAMAA TV, a government official revealed that gas consumers might face difficulty in the winter due to a shortage of fuel.