The Fertilizer Review Committee (FRC) Friday decided to defer any decision with respect to urea prices till the announcement of federal budget 2019-20, as the government intends to take revenue enhancement measures which may hit fertilizer industry, well-informed sources told Business Recorder.
Presided over by Prime Minister's Advisor on Commerce, Textile, Industries and Production and Investment, Abdul Razak Dawood, the fertilizer industry gave its viewpoint in detail. At least the head of two fertilizer companies and one second in command attended the meeting as in the previous meeting Razak Dawood had expressed serious annoyance at fertilizer companies for sending junior representatives.
The sources said the government and fertilizer industry gave their viewpoints on increase in urea prices, adding that there was a discussion on the government's failure to refund the amount of GST as well as the collection of GIDC by the fertilizer industry but not depositing the amount in government's account due to ongoing litigation.
Abdul Razak Dawood, sources said, expressed his difficulties in satisfying parliamentarians on account of urea prices, as they point out figures which show that the industry has not been responsive to government's concerns.
The Chairman FMPAC made a presentation; and emphasised the following points in particular: (i) industry held back price increase initially to allow time to the new government to settle down. However, media reports indicate that the ECC proceedings is not favourably inclined towards the industry; (ii) gas fields of Mari are fast depleting due to additional extractions for the power sector which was noted by the PM's Advisor with concern; (iii) industry has been highly responsible and responsive in terms of Fertilizer Policy 2001 by selling below international prices and passing on much more benefits to the farmers than it received under gas concessionary prices; and (iv) the government has not fulfilled its commitment in maintaining gas prices as per Fertilizer Policy 2001.
The fertilizer industry argued that prices have mainly been impacted by government's policy (subsidy withdrawal, GST restructuring, revision of gas prices) with minor share of industry in terms of inflationary impact.
The Advisor urged the industry to reduce prices voluntarily. It was explained to him that the budget will have an impact on prices because of taxes and gas price revision which is in the offing therefore, it would be more prudent to look into the prices after the budget. He agreed to hold on and decided to call a meeting after the budget.
On May 17, 2019 Secretary Industries and Production Aamir Ashraf Khawaja said that some portion of the recent increase in urea prices is unjustified as prices have touched Rs 1900 per bag in some parts of the country.
Secretary Industries told a parliamentary committee that the Ministry held at least three meetings with the representatives of fertilizer industry as it has to submit a report to the Economic Coordination Committee (ECC) of the Cabinet.
"We have witnessed an increase in urea prices by Rs 230 per bag in two phases ie Rs 140 per bag in the first go and Rs 90 in the second go. Urea prices have increased to Rs 1850-1900 per bag in far flung areas," he added.
According to the Secretary Industries, technical people of the Ministry and fertilizer industry held meetings to jointly work out the price. He said, the working done by both the teams indicate that some increase in urea prices is defensible but some increase is unjustified, adding that the Ministry is not satisfied with the justification provided by the fertilizer industry. Secretary stated that the Ministry will submit the report before the cabinet and take action accordingly.
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