Prime Minister's Advisor on Commerce, Textile and Industries and Production, Abdul Razak Dawood has reportedly expressed annoyance at the local fertilizer industry for increasing urea prices by Rs 90 per bag to Rs 1,830 per bag in April 2019 from Rs 1,740 in October 2018, well-informed sources told Business Recorder. The Advisor conveyed his anger at a meeting of Fertilizer Review Committee (FRC) which met on May 6, 2019 and was convened to review demand, production and supply and price hike of urea fertilizer.
The sources said Advisor was also furious at the fertilizer industry for sending its second tier for an important meeting, adding that Fauji Fertilizer had requested to reschedule the meeting on the plea that its Managing Director was out of Pakistan but the request was not entertained. M/s Fauji has increased urea prices which the government thinks unjustified at a time when new sowing season is in the offing.
According to sources, fertilizer sector is also collecting Gas Infrastructure Development Cess (GIDC) from consumers but is not depositing it in the national exchequer due to existing litigation. "Advisor has indicated that government is under political pressure due to price increase," the sources said, adding that the fertilizer industry identified the following factors that led to the increase:(i) transportation cost; (ii) packaging; (iii) inflation;(iv) devaluation; and (v) mark up rates (cost of financing).
"Fertilizer industry did not pass on the inflationary impact due to price capping which is calculated at Rs 360 per bag," said Brig. Sher Shah Malik (Retd) Executive Director Fertilizer Manufacturers of Pakistan Advisory Council (FMPAC). There is an impression in the government as well as in the agriculture sector that the country's fertilizer industry is making about Rs 40-50 billion profit per annum by getting cheap feed gas and selling fertilizer at higher prices.
However, fertilizer industry maintains that it received Rs 132 billion in gas subsidy (ie, difference between feed gas price and fuel gas price) over the past 8 years whereas it passed on Rs 527 billion (difference between international and local price) benefit to farmers. However, the industry has not revealed to the government as to how much financial benefits it reaped as per the Fertilizer Policy 2001.
Fertilizer industry also brought to the notice of Advisor to Prime Minister that Government of Punjab has directed security seals be affixed on all fertilizer product containers in pursuance of article 24 inserted through amendment in Punjab Fertilizer Control Order 1973 to verify its quality and traceability.
Earlier, on PSQCA SRO(1) 2015 issued by the Ministry of Science and Technology on May 5, 2015 under section 14 of Pakistan Standard & Quality Control Act VI of 1996 had wanted to affix a similar seal however, it was challenged in the court and stayed to avoid the cost burden on the farmers. Recently, FBR, through SRO 250(1)/2019 of February 26, 2019 directed importers and manufacturers to affix electronic monitoring "tax stamp" with similar features.
Fertilizer industry, however, argues that urea is a certified product as per international standards and there have never been any reports of counterfeit products like pesticides.
The fertilizer industry further argued that multiple government agencies are issuing similar directions on this matter which reflects the dire need for coordinated action towards attainment of common objective at national level, and avoiding additional burden on farmers through sale of stickers of various origins/venders. The industry has urged the Advisor to intervene and advise PSQCA, FBR and Punjab Agriculture Department to avoid such unwarranted costs and additional financial burden on the farmers.
Fertilizer industry submitted the following recommendation during the FRC meeting: (i) gas price may be reduced for fertilizer sector to effect any change; (ii)revision of GIDC may be processed expeditiously; (iii) outstanding subsidy and tax refunds may be released to reduce cost of borrowing to the manufacturers ;(iv) mismatch of input and output GST may be addressed;(v) decision of import of 100,000 tons urea without deliberation by FRC may be reconsidered in view of adequate supply situation in the coming months; and (vi) continuity of operation of SNGPL based plants may be ensured through payment of subsidy to SNGPL to avert any possibility of shortage of urea supply.
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