The federal government has reportedly decided not to import 0.1 million tons of urea due to financial constraints and on assurance from domestic industry that it will not increase price for the time being, well-informed sources told Business Recorder. The decision was taken at a meeting between the Prime Minister's Adviser on Commerce, Textile Industries and Production and Investment, Abdul Razak Dawood and other stakeholders on Wednesday.
The impact of increase in gas feed price from 185 to Rs 300 per MMCFD and fuel price from Rs 780 to 1,021 per MMBTU has been calculated at Rs 210 per bag.
The meeting was informed that there is no shortage of urea in the country as a surplus is available. However, urea prices have witnessed substantial increase in prices during the last 8-10 months.
The fertilizer industry intended to increase urea prices owing to increase in prices of feed and fuel by the SNGPL and SSGCL, in addition to GIDC. However, Razzak Dawood has asked the representatives of fertilizer industry not to increase urea prices without taking the Ministry of Industries on board. He further directed that the Ministry's officials and fertilizer industry should sit together and finalise urea prices.
According to sources, fertilizer industry has also been asked to hold a meeting with Petroleum Division to sort out differences on proposed amendments in GIDC Act.
However, the fertilizer industry wants clarity on contents of GIDC amendment and date of its enactment. Managing Director Fauji Fertilzer Company (FFC) stated that the industry appreciates the following decisions taken by the former finance minister with regard to settlement of the GIDC issue, pending since long, as it reflects the vision of the government on industrial development and growth: (i) past GIDC on fertilizer sector between January 1, 2012 and the date of commencement of proposed amendment to the GIDC Act, will be settled by waiving off 50 percent of the total GIDC, chargeable under various GIDC Ordinances/Acts as applicable from time to time, without any implications of related input GST; (ii) subject to continuity for the gas consumers in the country, rates of GIDC at second schedule of GIDC Act 2015 will be prospectively reduced by 50 per cent. The sources said, it was decided that import of 100,000 tons of urea would be cancelled because of sufficient inventory. Fertilizer industry has obliged the government to hold the price for a day or so, seeking clarity on GIDC amendment, contents and date. "We are hopeful, the government will honour the agreement on GIDC with former Minister for Finance Asad Umar," said one of the representatives of fertilizer industry. The prices approved for consumers of SNGPL and SSGC will also be made applicable for fertilizer and power sector consumers to whom gas is supplied directly from field by Mari Petroleum Company Limited (MPCL) and Pakistan Petroleum Limited (PPL).
On June 26, 2019, the ECC was informed that the government has approved a proposal to amend the GIDC Act whereby 50 per cent waiver in prospective GIDC rates will be available for all sectors excluding domestic and commercial sectors. The resultant reduced rates will off-set the increase in the base tariff to a major extent.
While remaining within the overall scheme of Gas Development Surcharge (GDS) and levy of collection under the law, Petroleum Division in consultation with Finance Division, Ogra and relevant stakeholders will develop a mechanism which would allow adjustment of any shortfall of SNGPL out of the surplus revenue generation of SSGC, so as to create a balance in the overall system. A proposal in this regard will be submitted to the ECC separately for consideration.
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