Islamabad : In a meeting of the standing committee of the National Assembly on Petroleum and Natural Resources, Fertilizer Manufacturers of Pakistan Advisory Council (FMPAC ) executive director , Sher Shah Malik , has proposed that the parliament may incorporate a provision enabling verified and qualifying investments in gas infrastructure made by GIDC-paying fertilizer manufacturers to be recognized and adjusted against their GIDC liability
The committee had discussed the issue as the fertilizer industry has serious reservations over the proposed amendment in GIDC Act 2010. FMPAC executive director , Sher Shah Malik , pleaded the case of the fertilizer industry before the committee and said the new amendment is going to add huge financial burden on the fertilizer sector as well as the farmers who are already in financial crisis due to week pricing system of their produces.
A written submission made by FMPAC ED , Sher Shah Malik , noted the proposed amendment to Section 4 of the GIDC Act expands the permissible use of GIDC proceeds to include “gas infrastructure development or any other strategic gas infrastructure initiatives” necessary for energy security and enhancement of gas supply.
It said “This creates an opportunity to address a longstanding policy anomaly: fertilizer manufacturers have already financed, from their own resources, strategic gas infrastructure that serves precisely the national objectives for which GIDC proceeds are intended to be utilized”.
The submission added fertilizer industry has invested: US$500 million was invested in a dedicated Mari gas network; Post promulgation of GIDC Act 2015, around US$300 million in compression facilities following declining reservoir pressure; and estimated US$200 million in further indigenous gas development and integration, including the Ghazeej gas field, is planned.
It maintained these are not merely commercial investments. They have enabled continued use of indigenous gas, sustained domestic urea production and supported national energy security, food security and foreign-exchange conservation.
It further argued the industry has simultaneously: paid substantial GIDC → financed strategic gas infrastructure from its own resources → continued bearing the unrecovered GIDC burden.
“The anomaly is particularly significant because the fertilizer sector has contributed approximately 44% of GIDC collections while consuming only around 19% of gas from the national gas basket.
Consequently, the sector has been a disproportionately large contributor to GIDC while also undertaking hundreds of millions of dollars of private investment in infrastructure required to secure indigenous gas supply.
Recognition of qualifying expenditure against GIDC would: Avoid double financing of the same national strategic objective through both GIDC and private capital; Recognize investment already made, rather than providing a future subsidy or fiscal concession; Conserve public resources by complementing Government investment with private-sector capital; Support indigenous gas utilization, thereby strengthening energy security; Protect domestic urea production and food security; and
Reduce pressure to pass unrecovered GIDC costs on to farmers, thereby protecting agricultural input affordability”, FMPAC stated.
Importantly, it maintained the proposed mechanism would be a set-off against existing GIDC liability, not a cash payment, grant, refund or budgetary subsidy. Expenditure incurred in 2015 and beyond would be eligible only after certification by the Federal Government against clearly defined qualifying criteria. To provide that qualifying expenditure already incurred by fertilizer manufacturers on strategic gas infrastructure may be adjusted against their outstanding GIDC liability, where such infrastructure serves the transportation, transmission, compression or utilization of indigenous natural gas for domestic fertilizer production. Following amendment is suggested to be included in the already proposed draft: “Provided further that qualifying expenditure incurred by a fertilizer manufacturing company on gas infrastructure serving the transportation, transmission, compression or utilization of indigenous natural gas for domestic fertilizer production shall, upon certification by the Federal Government, be eligible for adjustment against the outstanding GIDC liability of such company.”
In his personal submission , Sher Shah Malik said where a GIDC-paying private entity has already financed qualifying strategic gas infrastructure serving the statutory objectives of GIDC, the certified cost of such infrastructure should be eligible for adjustment against its GIDC liability.
He added the proposed amendment is therefore not a request for subsidy or fiscal relief. It is a request to ensure that the amended law recognizes strategic infrastructure irrespective of whether it is financed from GIDC proceeds or directly by a GIDC-paying entity.
He added the Committee is requested to endorse this principle and incorporate the proposed proviso in the Bill.
Recognition of investment—not concession; protection of farmers—not merely industry; and strengthening of energy and food security—not a cost to the Exchequer.
The officials of the Petroleum Division also seconded the point of the representative of the fertilizer industry. A senior official told the committee that the prices of fertilizer can go up by Rs 700 a bag after implementation of the proposed amendment in GIDC Act.
FMPAC proposal, however, faced opposition from PPP leader Syed Naveed Qamar, who argued that financing infrastructure through a levy on fertiliser would ultimately transfer the cost to farmers and consumers.
Qamar questioned why consumers should bear infrastructure costs incurred by companies and warned that extending such a mechanism could encourage other industries to seek similar treatment