The simmering conflict between a wide spectrum of industries and the government over the gas infrastructure development cess has the potential of blowing up into a full-scale battle in courts.
The Finance Act 2014, approved by parliament, incorporated all measures proposed in the budget 2014-15. The government lifted maximum ceiling on the GIDC, which, it believes, will help it collect Rs145bn through the cess during this fiscal year, up Rs57bn from Rs88bn last year. Industries had been cautioned about the raise.
Analysts say the government had originally proposed to raise the GIDC by a substantially higher amount for various sectors in the budget 2014-15. However, after an outcry by various industries, the rates were significantly toned down in the amended budget proposals.
Iqbal Ibrahim, chairman of Orient Textile Mills and a former chairman of the All Pakistan Textile Mills Association (Aptma) vehemently disagrees. “The increased cess would burden larger textile units by Rs200 to Rs250m, and the smaller units by Rs150 to Rs180m”, he said. He estimates that the energy costs for a textile composite mill will increase by around 15pc, making Pakistani exports uncompetitive against regional rivals China, India and Bangladesh.
Ibrahim lamented that the export-oriented textile sector, which has already been hit by the rupee’s appreciation, will also be deprived of advantages that would have accrued due the GSP Plus status.
Earlier in the week, Aptma members emerged crestfallen from their meeting with federal textile minister Abbas Khan Afridi, who flatly told the textile lobby that the government was in no position to take back the GIDC hike.
Ultimately this attitude may force different industries to take the matter to the courts.
