Islamabad - After validating government request to increase the electricity tariff up to Rs4 per unit last week, the regulator is set to authenticate hike in per unit price of natural gas under GIDC which will further jack up power price as a considerable share of electricity is being generated from gas-run plants.

The gas infrastructure development cess (GIDC) was imposed on natural gas with an objective to raise money for new projects or to offset the effect of increasing gas theft. But it affected electricity producers after gas distribution companies asked power producers, using natural gas, to deposit the tax.

After imposing the levy through ordinances, for almost one year, government last month, managed to pass Gas Infrastructure Development Cess (GIDC) Bill, 2015, from parliament. The law was reportedly aimed to increase tax recovery between 15-20 percent, and to cover gas theft losses under IMF programme.

After passage of this law gas distribution companies started charging the cess on consumers. The gas companies also asked the power producers using gas to produce energy to deposit the GIDC for the period between 2013 and 2015 in lump sum, which worried the producers.

Engro Powergen Qadirpur, a power generation company, in a pending petition in Lahore High Court against GIDC, pleaded that industrial sector has been excluded from the levy but the power producers using natural gas have not been exempted. It further submitted that SNGPL demand for recovery of GIDC from 2013-May 2105 cannot be met as the petitioner has not received the same amount from NTDC, the sole purchaser of electricity. The petitioner further submitted that since the matter relates to financial and policy matter so the matter should be referred to Nepra. The high court in its decision on 4-6-2015 sent the matter to the authority, putting it in a difficult situation.

“Independent Power Producers (IPP’s) are buying gas to produce electricity. If they are asked to pay GIDC, they cannot pay it from their own pocket, it is logical. But if we tell them to pay in any case; in other words, we are telling consumers to pay a huge amount under GIDC. At the same time, we are under tremendous pressure as being a regulator we have no option but to pass on this GIDC to end consumer,” said a Nepra source.

For example in March this year, according to CPPA data, 25.53 percent of total electricity was generated through gas. The per unit electricity price was calculated 4.56 paisa per unit, while on furnace oil this unit price was 9.72 paisa and on HSD it was 13.81 paisa per unit, he said, adding if gas prices would increase the price of whole energy mix would shoot and the consumers would have to pay more than what they are paying now.

He was of the opinion that seeing the tremendous pressure Nepra would allow charging of GIDC in bills but would have to chalk out a plan as the lump sum GIDC from 2013-May 2015 could not be charged in one month bill.

Analysts believe the proposed increase would severely affect common man, as more than half of the country lives below poverty line. “There are two aspects of this would-be increase; firstly, it will have direct financial impact on every electricity consumer; secondly, it would increase cost of doing business in the country which would result in increase in inflation,” said Khalid Hussain, a teacher of economics.