The domestic fertilizer industry is likely to further increase urea prices by Rs 200 per bag in case government fails to release remaining subsidy, well informed sources in Ministry of National Food Security and Research (MoNFS&R) told Business Recorder.
Minister for National Food Security and Research, Sikandar Hayat Bosan held a meeting with the fertilizer industry and sought reasons for the increase in urea prices. The industry has already increased price of urea by Rs 100 per bag.
The Minister mentioned government 'favours' in support of the industry, including GST restructuring on inputs in the next budget. He expressed his annoyance at the decision to unilaterally raise prices of urea that has embarrassed the outgoing government.
The industry gave the rundown of events since the inception of subsidy scheme in 2016, the industry's decision to limit the price rise by Rs 106 per bag and the complications due to processing of claims and resultant financial cost due to delayed payments.
"Industry appreciated the efforts of the Ministry but expressed remorse over non fulfillment of commitment by the government and inordinate delays in the release of funds by the Ministry of Finance," the sources added. One of the participants of the meeting told this scribe that the industry had been running from pillar to post for release of subsidy. Prime Minister's office directive of July 24, 2017 for release of payments on the basis of 80:20 was cited again and again but was not followed either in letter or spirit and payments of 80% remain pending and nothing is evident on 20% third party validation process.
"Fertilizer industry maintains that in order to recover the exact amount, besides subsidy and industry's contribution, and recurring financial cost, inflation and other factors, the price should have been raised by over Rs 200 per bag," he added.
The Prime Minister office on March 29, 2018 was informed about the rise in prices after April 15, 2018 in case of non-payment of pending amount. And with no response from the government, industry was constrained to revise the prices upward to partially mitigate the liability and recover losses, he continued.
The Secretary MoNFS&R Fazal Abbas Makan revealed that he has processed a case for release of 80% of claims of 2017/18 up to February and hoped to receive the amount to the tune of Rs 4.74 billion shortly within a couple of days.
He phoned the Finance Minister during the meeting and the Food Minister requested release of the amount of claims. The Minister desired that industry may oblige the government at this critical juncture and he will make a concerted effort for release of the remaining payments. "I guess the government felt political pressure due to the price hike and for face saving has partially released claims. Dr Miftah Ismail does not understand the political price of his dillydallying approach", said another stakeholder. The Secretary identified favours granted to the industry like subsidized gas and permission to export and resistance to allowing imports.
In response the industry pointed out that the cost of gas in Pakistan is higher vis-à-vis countries from where urea maybe imported and suggested that those plants that have shut down due to lack of gas may be operationalized through provision of gas.