The government is likely to exempt Diammonium Phosphate (DAP) from General Sales Tax (GST) aimed at providing fertiliser to farmers at subsidised rates, well-informed sources told Business Recorder. This consensus was evolved after two meetings amongst the concerned ministries, provincial governments' representatives and fertiliser industry.
Finance Minister Ishaq Dar had announced Rs 14 billion subsidy on sale of DAP, of which Rs 7 billion will be paid by the federal government whereas the remaining amount would be paid by provinces equally. The Punjab government argues that local fertiliser industry should print price on the bag so that the farmers are aware of the price they must pay per bag. Provincial governments had further emphasised the need to ensure that farmers are supplied DAP at subsidised rates.
According to sources, representatives of fertiliser industry clearly conveyed to the government they have no mechanism to monitor their dealers in case they overcharge consumers. Local fertiliser industry maintained that they have no mechanism to control dealers. Fertiliser industry suggested that the entire allocated amount should be deposited in an escrow account and each supplier should submit claims to get the subsidy.
Some of the participants argued that the main purpose is to ensure supply of DAP at Rs 400 per bag less than the current price to farmers and this purpose can be achieved through a mechanism other than giving amount of subsidy to the fertiliser companies. "The government can exempt DAP from GST and pay Rs 14 billion directly to the FBR as GST. In this way farmers will get fertiliser at subsidised rates without involvement of dealers," the sources quoted the participants as proposing. The sources maintained that the participants agreed on the proposal which will be submitted to the Economic Co-ordination Committee (ECC) of the Cabinet for final approval.
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