GIDC Amendment clears key hurdle, PKR 400 billion recovery in sight

Pakistan’s long-running Gas Infrastructure Development Cess (GIDC) saga appears headed toward resolution, with the approval of the GIDC (Amendment) Act 2025 by the Cabinet Committee on Disposal of Legislative Cases (CCLC), setting the stage for the recovery of nearly PKR 400 billion in stalled arrears.

According to Optimus Capital Management, the amendment broadens the scope of eligible energy infrastructure projects, potentially unlocking cess collections that have been tied up in litigation for nearly a decade.

“The approval of the GIDC (Amendment) Act 2025, which broadens the scope of eligible energy infrastructure projects, will trigger the collection of approximately PKR 400 billion in stalled cess arrears from all sectors,” Optimus Capital said in a research note.

The move is consistent with the Supreme Court’s 2020 ruling that fertilizer companies had passed the cess onto farmers and must remit the proceeds to the government.

A PKR 457 billion liability

Total outstanding GIDC across sectors stood at PKR 457 billion as per June 2019 data, with the fertilizer sector accounting for PKR 164 billion. National arrears accrued through July 2020 were estimated at nearly PKR 400 billion.

Collection is expected to proceed via an installment plan, with final terms to be negotiated between the industry and the government.

Optimus Capital estimates a direct cash flow impact of around PKR 60 billion for fertilizer producers.

“For the old plants, the principal amount has already been provisioned and will primarily drag on companies’ cash flows and balance sheets. The P&L impact will materialize through the loss of interest income as cash reserves are depleted,” the brokerage noted.

Positively, the Late Payment Surcharge (LPS) has already been exempted, shielding companies from compounded interest on historical liabilities.

Un-provisioned risk: EFERT and Fatima in focus

Optimus flagged that Engro Fertilizers Limited (EFERT) and Fatima Fertilizer Company Limited (FATIMA) are carrying an estimated PKR 88 billion in un-provisioned exposure.

The disputed amounts relate to EnVen plant (~PKR 48 billion) and Sadiqabad plant (~PKR 40 billion).

Both facilities were established under the Fertilizer Policy 2001 and operate under sovereign guarantees for fixed gas prices. The companies maintain these plants are exempt from GIDC obligations, and the matter remains under litigation.

“The respective amounts remain un-provisioned,” Optimus Capital stated, adding that while retrospective taxation precedents create risk, the probability of a complete adverse outcome appears low.

The brokerage noted that recent retroactive measures, including super tax and windfall taxes on foreign exchange income, set a “precarious precedent.” However, the government has reportedly indicated that companies’ financial health, particularly EFERT’s weaker balance sheet, will be considered.

What Is GIDC?

The Gas Infrastructure Development Cess is a federal levy introduced in 2011 to finance large-scale energy infrastructure projects, including the Iran-Pakistan (IP) Pipeline, Turkmenistan-Afghanistan-Pakistan-India (TAPI) Pipeline, LNG import and regasification facilities and North-South gas pipeline project.

For fertilizer manufacturers, natural gas serves both as fuel for power generation and as feedstock — the core raw material for urea production.

A decade of litigation

Initial collections were made between 2011 and 2016 when the government recovered approximately PKR 128 billion from fertilizer plants, including PKR 112 billion for feedstock and PKR 15 billion for fuel.

Payments halted in October 2016 after the Sindh High Court declared the GIDC Act 2015 unconstitutional, leading companies to secure stay orders.

In August 2020, the Supreme Court upheld the constitutionality of the GIDC Act 2015 and directed that all arrears accrued through August 2020 must be paid, recovery be made in installments (initially 24, later extended to 60 equal monthly installments) and further collection cease until previously collected PKR 295 billion was utilized for intended projects.

The Court ruled that fertilizer companies had the mechanism to pass on the cess to customers, and that earmarking funds for infrastructure satisfied the quid pro quo requirement.

Reporting mismatch

Optimus Capital highlighted a discrepancy between government and corporate figures.

While government data as of June 2019 showed fertilizer arrears at PKR 97 billion (PKR 80.4 billion for feed-old and PKR 16.6 billion for fuel), companies have provisioned PKR 115 billion.

“This PKR 18 billion difference arises from the Supreme Court’s 2020 verdict, which mandated the recovery of all arrears accrued through July 2020,” the note explained.

Corporate provisions by major players, including FFC, EFERT, FATIMA and AGL, reflect an additional 13 months of accruals not captured in earlier official data.

Toward final resolution?

In February 2026, the CCLC approved the draft GIDC Amendment Act 2025, aimed at resolving the decade-long dispute by broadening the definition of qualifying infrastructure projects and addressing legal concerns over quid pro quo.

However, the amendment still requires ratification by the Federal Cabinet and Parliament before becoming law.

Optimus Capital believes the legislative momentum signals the “clock has finally started” on long-pending arrears recovery, with structured installments likely easing immediate liquidity stress but exerting pressure on sector cash flows over the medium term.

For Pakistan’s fertilizer industry — and government revenues — the coming months may finally bring closure to one of the country’s most protracted fiscal disputes.