Gas Infrastructure Development Cess (GIDC) from January 1st: Urea prices to increase further

Karachi: The price of Urea would jump by PKR 250-300 per 50-kg bag on account of imposition of Gas Infrastructure Development Cess (GIDC) from January 1st, 2012 which would raise feedstock gas prices by nearly 200%.

According to Alfalah Securities Limited, currently, fertilizer manufacturers are getting feedstock gas supply at a price of PKR 102/mmbtu, which would be raised by PKR 197/mmbtu to PKR 299/mmbtu after the imposition of Gas Infrastructure Development Cess.

The National Assembly and Senate has approved two money bills in the name of Gas Infrastructure Development Cess (GIDC) and Petroleum levy aimed at collecting PKR 38.39 billion which would meet the expenditures of numerous infrastructure projects including Iran-Pakistan Gas Pipeline, Turkmenistan-Afghanistan-Pakistan-India (TAPI) Pipeline, LNG import and LPG supply enhancement.

Besides the imposition of Development Cess, the government has already increased fuel stock gas prices by PKR 15/mmbtu to PKR 448 per bag from previously PKR 433/mmbtu. The imposition of Cess would collect PKR 11.1 billion from the fertilizer sector, PKR 1.87 billion from CNG stations, PKR 4.62 billion from local industries, PKR 5.88 billion from IPPs while PKR 430 million and PKR 460 million would be collected from Mari Gas and Pakistan Petroleum respectively.

The imposition of the gas cess would make the urea expensive for the farmers who may resort to using lesser urea due to erosion of purchasing power of the farmers. This measure is expected to aggravate food inflation as the rise in cost would be passed on to the end consumers and may lower crop yields due to lesser urea consumption.

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