The Competition Commission of Pakistan (CCP) has issued showcause notices to the Fertilizer Manufacturers of Pakistan Advisory Council (FMPAC) and six leading companies for allegedly fixing urea prices, which would constitute a prima facie violation of Section 4 of the Competition Act, 2010.

Urea prices play a pivotal role in determining the prices of essential food commodities. Any arbitrary increase in urea prices by fertilizer companies can lead to higher costs for farmers, ultimately resulting in more expensive prices for consumers.

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The CCP’s inquiry found FMPAC and its six member firms – Engro Fertilizers Limited, Fauji Fertilizer Company Limited, Fatima Fertilizer Company Limited, Fauji Fertilizer Bin Qasim Limited, Agritech Limited, and Fatimafert Limited – prima facie in violation of the Competition Law.

The inquiry was initiated following an FMPAC advertisement in November 2021, where they announced a ‘Maximum Retail Price of Urea at Rs 1768 per 50kg bag’, during a period of rising prices and reported shortages.

The inquiry proceedings revealed that urea prices were deregulated under the Fertilizer Policy of 2001. The advertisement contents were seen as a decision by an association on the sale rate of urea, a violation of Section 4(2)(a) of the Act.

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The inquiry also noted a pattern of uniform pricing and price parallelism among urea companies, suggesting potential collusive activity.

Despite receiving subsidised feedstock gas from the government, which varies in rate for each plant, these companies’ prices showed uniformity in some instances. This raises questions about their cost structures and subsidies received.

From a competition law perspective, the announcement of prices by an association, even if relaying government-set prices, is considered a commercial decision beyond permissible activities. CCP has repeatedly directed business associations to refrain from engaging in price fixing or other collusive practices.

The persistent double-digit food inflation in Pakistan over the past few years underscores the ripple effect of urea price hikes on the broader economy.