The parliament has approved GIDC Act 2015 yesterday, where we believe the said has sprung a few surprises.
- The GIDC for industrial users has been reduced from Rs150/mmbtu to Rs100/mmbtu (+ve for cements and textiles).
- If the industrial users have not collected the cess so far under GIDC 2011 and GIDC 2014, the cess shall not be collected from the industrial sector (excluding Fertilizer Fuel) (+ve for textiles).
- The Second Schedule under GIDC 2015 sees introduction of two categories (1) Fertilizer Feed (Old) and (2) Fertilizer Feed (New), replacing the previous category of Fertilizer – Feed Stock. The rate of GIDC is same at Rs300/mmbtu. We believe this raises the risk of GIDC on new fertilizer plants, receiving concessionary gas prices (-ve for FATIMA and EFERT).
- We seek further clarity on GIDC. Based on initial impressions, we believe yesterday’s developments to be positive for Cements and Textile (given that the market had already priced-in approval of GIDC) and negative for FATIMA and EFERT (though these companies will continue their legal recourse).
Syed Atif Zafar, CFA
Head of Research
JS Global Capital Limited
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