GIDC collections come under scrutiny as court questions fate of funds

Updated February 18, 2020

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Despite collecting the Gas Infrastructure Development Cess (GIDC) for almost 10 years now, the government on Tuesday was left floundering for a response when a three-member bench of the Supreme Court began asking questions about what the money had been used for. — AFP/File
Despite collecting the Gas Infrastructure Development Cess (GIDC) for almost 10 years now, the government on Tuesday was left floundering for a response when a three-member bench of the Supreme Court began asking questions about what the money had been used for. — AFP/File

ISLAMABAD: Despite collecting the Gas Infrastructure Development Cess (GIDC) for almost 10 years now, the government on Tuesday was left floundering for a response when a three-member bench of the Supreme Court began asking questions about what the money had been used for.

The SC bench, led by Justice Mushir Alam, had taken up a case relating to the GIDC 2015 levy. The federal government was asked to explain the existing state of the three projects for which GIDC fee was originally levied as well as explain why it was being shown as “tax revenue” in government accounts or whether any of the funds had ever been used towards the purpose for which they were supposedly collected.

In all cases, the answer was in the negative. Towards the end, the court was left frustrated because the finance ministry representative told the bench that dealing with the GIDC was not even his domain.

Senior counsel Makhdoom Ali Khan, who was representing a number of CNG station owners, argued that the Iran-Pakistan (IP) Pipeline Project had been frustrated and Pakistan’s total equity for the Turkmenistan-Afghanistan-Pakistan-India Pipeline Project (TAPI) was Rs31bn and no GIDC was required at all for the LNG projects, yet the government had collected Rs295bn from this head thus far.

Justices demand to know where is the gas infrastructure?

Later, Mubeen Saulat, the CEO of Inter State Gas Company — a firm set up to manage the Pakistan side of TAPI and IP project — gave a presentation to the court and stated that a lot of work had been done. Justice Mansoor Ali Shah observed that it was obvious that the government collected Rs295bn but did nothing. No service at all had been provided, he said.

He inquired if a company went into liquidation after paying GIDC for 10 years what service will it ever get? Justice Shah also remarked that a company set up 10 years later would have paid no GIDC but will get the service. How is that fair, he questioned.

When the proceedings commenced on Monday, no one representing the government functionaries was in the court. The bench expressed displeasure and directed the court staff to convey the message.

In the meanwhile, the court asked Makhdoom to address some of its queries on the constitutionality of the issue.

At this Justice Shah inquired what work had been done on the ground. The CEO replied that agreements had been concluded, land will be acquired and work will begin. Justice Shah asked whether it would be fair to say that all that has been done was paper work since there was no work on the ground.

Reluctantly the CEO admitted that was a fact but said that for TAPI the process of land acquisition had commenced.

Justice Shah however observed whether any notification had been issued in this regard. The response however was in the negative.

The CEO then contended that for IP project a notification had been issued but Justice Alam asked whether any land had been acquired. The CEO answered that it has not been done. The notification was only to commence the process.

Justice Faisal Arab remarked that the government had not produced any contract or document, only unsigned statements. Even from these statements it was obvious that even the paper work had been started after the cases reached the Supreme Court.

The CEO replied in the negative and said a lot of work had been done but later admitted that the dates given in his statement were all after the case had reached the court.

When the same question was put to the Accountant General he said he had no idea adding he could only release the money where a PC-1 had been prepared for the projects. The accountant general said he had not received any PC-1 for any of the projects.

When Justice Arab asked whether he had any control over the Rs295 billion already collected he answered in the negative and said that it was the domain of the finance ministry.

Justice Shah observed that why the money was shown as a tax revenue if it was a fee. The accountant general again said that this was done by the finance ministry and he had no control over it.

Deputy Secretary Finance submitted that he too had no idea why the funds were not released for the North South Gas Pipeline and the Gas Storage Project as this was not his subject. He said his domain was the budget and this was not a budgetary matter.

Court moved to order interest rate reduction

A pro bono publico petitioner and former commerce minister on Monday requested the Supreme Court to direct the federal government to reduce the central bank’s policy rate by half — 6 or 7 per cent — to scale down interest payments being paid out of public money to finance fiscal deficit.

Filed in person, the petition pleaded before the apex court that the reduction in deficit would have a number of positive effects and would contribute to the reduction of the external current account deficit and contain the depletion of foreign exchange reserves, besides lower deficit would reduce inflationary pressures and control the accumulation of debt.

The petition has also sought a direction for the State Bank of Pakistan (SBP) to immediately introduce appropriate capital controls and ensure orderly withdrawal of hot money from Pakistan and avoid the risk of instability in the foreign exchange market.

Published in Dawn, February 18th, 2020