The Ministry of Finance (MoF) is reported to have released Rs 3.3 billion to Trading Corporation of Pakistan (TCP) on account of urea subsidy. Sources told Business Recorder on Tuesday that the ministry has moved another summary for the payment of more than Rs 3 billion on account of urea subsidy. This payment is likely to be released by the end of this month after formal approval by the new finance minister.
At present, the ministry of finance is quickly disposing cases relating to various payments. The TCP, which has a huge backlog of payments owed by the ministry on various accounts, particularly urea subsidy, is also making efforts for timely clearance of its dues. Over the past few years, the state-run grain trader has been engaged in importing urea to meet domestic demand on federal government's orders.
Until the recent past, Pakistan was self-sufficient in urea production. The country has an installed capacity of producing 6.7 million tons of urea annually against a domestic demand of 5.5 million tons annually. Market players contended that if local plants are consistently provided gas, the government can ensure timely availability of key farm input to farmers at a cost effective rate, besides helping the government to reduce its subsidy spending.
The imported variety is much costlier than locally produced urea, therefore the federal government is compelled to pay subsidy on the imported commodity to provide relief to growers. Although international urea prices have been depressed over the past two years, but the government still needs to pay billions of rupees in subsidy on imported urea as the maximum price of imported urea has been fixed at Rs 1,600 per 50-kilogram bag, which is even less than locally produced urea price at Rs 1,650 per 50-kg bag.
According to sources in the fertiliser sector, the country imported as much as 1.2 million tons of urea over the past fiscal year and an average amount of Rs 1,000 per 50-kilogram bag subsidy is being paid on its import. On the whole, the subsidy on imported urea has been calculated to be nearly Rs 24 billion during FY12.
Sources said that cumulatively, TCP has an outstanding payment of nearly Rs 60 billion on account of urea subsidy. This amount includes the outstanding subsidy amount of FY11 and FY12. Of the total, Rs 3.3 billion has been paid by ministry of finance during the past week, decreasing the overall receivables against urea subsidy at Rs 56.7 billion.
They said that another Rs 3.3 billion payment is expected by the end of June this year and a summary has already been moved by the ministry on the request of TCP. Meanwhile, Utility Stores Corporation (USC) also paid Rs 1.5 billion on account of sugar. For the past three years, TCP has also been procuring sugar from domestic mills to ease their financial crunch.
The procured sugar is being supplied to USC, which is selling the commodity through its outlets at a subsidised rate of Rs 47 per kilogram. The USC made the payment in the previous week in two instalments of Rs 700 million and Rs 800 million. TCP's current receivables toward USC stand at Rs 32 billion.