In order to minimise subsidy the Ministry of Industries has raised the imported urea price by Rs 300 per ton to Rs 1600 per 50kg bag. Source told Business Recorder on Thursday that Ministry of Finance for a long time was demanding some raise in the imported urea aimed to reduce the subsidy on imported urea. Despite billions of rupees subsidy, imported urea is being sold at an exorbitant price in the domestic market.
The federal government involved a huge amount of subsidy, with the apparent intention to support and benefit the farmers of Pakistan. However, low priced imported urea had failed to reach the farmers at suggested dealer transfer price. Instead of Rs 1300 per 50kg bag set by government, the imported urea was being sold in the markets at Rs 1700 to Rs 1800 per bag as the domestic urea prices stood at Rs 1800 per bag.
Therefore, some differences were created between ministry of finance and ministry of industries over the dealer transfer price of the imported urea as ministry of finance believes that there should be a maximum Rs 50 per bag market price variation in the imported urea and locally produced urea aimed to reduce subsidy as well as to end illegal profit on imported urea.
According to the sources, in a meeting to review the urea availability and pricing mechanism, representatives of finance ministry also urged that price difference of imported urea and locally produced urea should be reduce up to Rs 50 per bag as the price difference was around Rs 495 per bag and taking advantages of huge difference in market price of imported and locally produced urea, some vested interest dealers were selling imported urea at higher prices.
Therefore, on the pressure of ministry of finance the ministry of industries has decided to revise the market price of imported urea. Revising the price of imported urea ministry of industries has raised the price by Rs 300 per bag and now the 50kg imported urea bag would be available to the farmers at the price of Rs 1,600 instead of Rs 1,300 previously.
However, sources said that even after current increase of Rs 300 per bag in the market price of imported urea, there remained a price difference of Rs 195 per bag between locally produced and imported urea which has still open some doors for market movers to fleece the farmers. Currently, local urea is being sold at the price of Rs 1800 per 50kg bag in the domestic market due to massive gas curtailment and newly imposed taxes.
Difference between imported urea and locally produced should be not more than Rs 50 otherwise it would pave the way for the corruption and billion of rupees subsidy will be go in the pockets market mover, sources said and added that previously price difference between imported and domestically produced urea was not more than Rs 20 per bag, while about Rs 200 differentiate means an open invitation to market movers and vested interests.
They said that in 2011 alone, government has imported around 1.45 million tones of urea by spending a precious foreign exchange of $784 million, which was one of the highest ever urea import in a single year in the history of the country. In addition, to keep this highly expensive urea at affordable rates, the federal government also spent a subsidy of over Rs 54 billion on imported urea primarily to provide some relief to the country''s poor farmers. Contrary to the objective of giving away billions of rupees of subsidy, the farmers were not the real beneficiary of urea subsidy, while on the other hand powerful dealers and market movers made windfall of profits through selling the imported urea at higher price.
Sources said government has imposed two types of taxes on the locally manufactured urea one being 16 percent General Sales Tax (GST) levied last year and Gas Development Cess (GDC) to the tune of 200 percent in 2012. The imposition of two taxes has put an additional burden on fertiliser companies as well as farmers.
It is now an open secret that the imported urea was being distributed through some politically influential persons, patronised by some ruling government personalities. These beneficiaries had been deliberately allowed to run a parallel distribution and sale of the urea at exorbitant prices and mint money. The extreme shortage and price hike of the urea created much hue and cry among the farming community of Pakistan.
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