Financial malpractice claims in the fertilizer sector, CPP

Islamabad:

Government officials blame fertilizer manufacturers, arguing they profit at the expense of farmers while enjoying the benefits of cheaper gas. A recent meeting of the Economic Coordination Committee (ECC) highlighted a difference in the intended purpose of providing natural gas to the fertilizer sector at subsidized rates. While the aim was to provide affordable fertilizer to farmers, the expected flow reduction effect has not materialized and market prices of fertilizers continue to rise.

EKK members stressed the urgent revision of natural gas prices for the fertilizer sector, stressing the need for more equitable distribution of benefits to farmers. In addition, fertilizer manufacturers are accused of withholding several billion rupees owed to the government on behalf of the Gas Infrastructure Development Cess (GIDC), funds originally received from farmers. GIDC payments, meant to contribute to major pipeline projects such as TAPI, IP and Pakistan Gas Stream project, have allegedly been collected by fertilizer manufacturers. Legal battles surrounding the GIDC issue have led to stay orders from lower courts, preventing the payment of outstanding amounts exceeding Rs400 billion.

The Supreme Court took suo moto notice when the PTI government waived 50% of the total amount due against fertilizers and textiles. Fertilizer makers are also accused of distributing dividends to shareholders without meeting their tax obligations to the government, adding another layer to the complex financial web.

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Captive Power Plants (CPPs) face scrutiny

CPPs, particularly energy efficiency and gas supply practices, are audited, revealing alleged irregularities in their operation. Despite their inefficiency, CPPs continued to receive gas at a discount, influenced by the monopoly of the textile mills that own them. The government’s decision during the previous PTI government to conduct an energy efficiency audit of CPPs was met with resistance, with legal cases filed by textile industries.

In 2021, a decision was made to cut off gas supplies to CPP, a move that has yet to be implemented. The members of the EKK stressed the importance of continuing the court cases against the CPPs to address alleged irregularities. Textile mills, which hold CPPs, are also accused of benefiting from subsidized electricity, adding another layer to the alleged financial wrongdoing in the sector.

The ECC was informed that the gas supplied to these units was already blended gas. However, there was a consensus that a clear roadmap should be drawn up on the issue of gas supply to CPPs, with a separate brief to be initiated by the Petroleum Directorate.

Published in The Express Tribune, November 24^u2023.

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