Under Article 158 of the 1973 constitution, the province which is well headed in natural gas shall have precedence over the rest. Sindh produces 70 percent of the natural gas of Pakistan; however, in the third week of June this year, the Sui Southern Gas Company (SSGC) stopped gas supply to industries in Karachi for an indefinite period, which gave rise to an environment of panic in the sector.
The reason, according to the federal government, was the shortfall of 200-250 mmcfd, resulting in 4.3 percent decrease in gas production from June 8 to 15, creating a one-of-its-kind crisis in the summer months.
The Peoples’ Party government back in 2008 had inherited a considerably worse gas shortfall that it overcame through the confidence of the Parliament namely, the Gas Infrastructure Development Cess (GIDC) Act 2011.
It’s been a decade since the transformation of the GIDC Act 2011 to the GIDC Act 2015; where do the entities of section 4 stand? The law clearly stated that the collected cess would be used by the federal government only on Iran-Pakistan (IP), Turkmenistan-Afghanistan-Pakistan-India (TAPI) gas pipeline projects, LNG or other ancillary projects.
The estimated cost for the IP gas pipeline was stated to be 271 billion, TAPI 31 billion, North South gas pipeline 20 billion and the underground gas storage project at 75 billion. According to figures provided by the PTI government to the Supreme Court, Rs2.95 million were collected in lieu of cess till June 30, 2019. In July 2020, the collected cess amounted to Rs307 billion.
In 2015 when he was the petroleum minister, Shahid Khaqan Abbasi had claimed that the IP gas pipeline would be completed by the end of 2016, but all in vain. Surprisingly, there has been no mention of the GIDC projects in the Pakistan Economic Survey since 2015.
The PML-N government plugged the shortfall by importing LNG from Qatar. The PTI government admitted before the Supreme Court that it is following the same policy. Chapter 14 of the Pakistan Economy Survey 2019-2020 clearly has, “to meet shortfall, the (PTI) government has initiated the import of LNG”.
Regarding the above cited facts, Justice Mansoor Ali Shah has brought the PTI and PML-N government in the dock. In the case M/s Cherat Cement Co. Ltd., Nowshera etc v/s Federation of Pakistan (C.R.P No. 421/2020), he observed in Para. 12 of his dissenting note: “The documents (submitted before this court) show after a decade of charging GIDC ... There is no sign of development of the gas pipeline projects in Pakistan. Absence of the said projects and emphasis on the import of LNG from Qatar in the latest Pakistan Economic Survey hazards a guess that the government is either not willing to or is unable to complete these pipeline projects and therefore shortfall.”
The GIDC Act is purpose specific, which is to meet the gas shortfall through IP, TAPI etc. The import of LNG from Qatar has no mention in it. How is it then justified for a government to go beyond the scope of this act, override Parliament, and spend the cess on a non-GIDC entity?
The question arises, is the rule of quid pro quo satisfied? Does there exist a transparent correlation between the collection of cess and expenditures?
Article 266 of the Indian Constitution and Article 78 of Pakistan’s are twins. In Ratilal Gandhi v. State of Bombay (AIR 1953 Bom. 242), the apex court of India ruled, “when moneys are received as a result of fees imposed for a specific purpose ... such fund doesn’t form part of the Consolidated Fund under Article 266”. Whilst, to this date, the crystal clear Article 78 is ambiguous for the Governments of Pakistan. Intentionally? Maliciously?
The expression “all revenues” used in Article 78(1) of the constitution covers revenues like tax and duties etc., raised for the government’s purposes; they have to be credited in the Federal Consolidated Fund. The rest are compensatory fees falling under the expression “all other moneys” used in Article 78(2), which have to be credited to the Public Account; the government can’t utilitise the amount submitted in the said account as per its own pleasure and will.
In the Durrani Ceramic case (PLD 2015 SC 354), the Supreme Court elaborated that the cess is a fee in lieu of the future benefits avowed; it shall not be considered tax, which is charged on the facility already in existence and being provided by the government. In the violation of this judgment, the government mentioned the cess ibid as “Tax Revenue” in the annual budget statement of FY 2019-2020 and 2020-2021. In the annual budget statement FY 2021-2022, it particularly cited the cess this year to fall in the category of Articles 78(1). The government continues to credit cess in the Federal Consolidated Fund, which allows the utilisation of the cess collected for “any purpose” of the government.
In M/s Khurshid Soap & Chemical Industries (Pvt.) Ltd v/s Federation of Pakistan (Civil Appeals No. 1113-1115 of 2017 etc, the Supreme Court ruled, “the proceeds of cess shall be identifiable in the accounts by using separate accounting codes.”
Despite being asked religiously, the DAG failed to furnish the statement of the GIDC accounts on the behalf of the government and instead furnished a general statement of Federal Consolidated Fund. To quote Justice Mansoor, the “initial reluctance and then the failure to place on record the GIDC account’s statement gives rise to an adverse inference against the federal government under Article 129(g) of the Qanoon-E-Shahadat Order 1984. It shows that the collected amount isn’t physically present in the account and has already been spent elsewhere.”
He also added, “The government plans to start the NSGP project only. This project will not generate natural gas, but is a support infrastructural project and will not address the shortage of natural gas in the country.”
The dissenting note of Justice Mansoor Ali Shah is no less than a charge sheet against the present and previous governments. It goes without saying today’s gas crisis is due to the non-execution of the act of the parliament; it is a government-made problem.
Only the implementation of the constitutional measures taken in 2011 can help Pakistan overcome the gas crisis.