Fatima Fertilizer Company Limited (FFCL) has sought refund of penalty amounting to Rs 119 million imposed by State Bank of Pakistan (SBP) for allegedly not exporting urea to Sri Lanka as per the agreement, well informed sources told Business Recorder
Economic Coordination Committee on January 23, 2017 and May 16, 2017 had allowed export of 0.6 million tons urea till October 31, 2017. Upon expiry of deadline, around 41,000 tons export orders primarily from Sri Lanka could not be shipped. Later, on request from government authorities of Sri Lanka, the ECC in its decision on December 29, 2017, extended deadline in urea export from October 31, 2017 to February 28, 2018 which was notified by the Ministry of Commerce on January 10, 2018 and related SBP EDP circular letter of January 17, 2018 permitting exports to Sri Lanka retrospectively from October 31, 2017 to February 28, 2018.
The Commerce Division informed the ECC on December 29, 2017 that in order to facilitate export of surplus urea, the ECC on 23rd January, 2017 took the following decisions : (i) export of urea fertilizer up to 0.3 million tons be allowed on the pattern of modalities adopted for export of sugar, implemented and monitored by the State Bank of Pakistan; (ii) export of urea would be effected no later than April 28, 2017; (iii) Fertilizer Review Committee (FRC) would meet immediately after April 28, 2017 to review the exported quantities, and if the originally estimated surplus materializes, the committee may recommend additional quantities of export; (iv) FRC would monitor domestic prices of urea on a monthly basis to ensure that there was no increase in retail price [as per weekly sensitive price index]. FRC would recommend to ECC of the Cabinet for discontinuation of further exports if there was an increase in retail price; and (v) the subsidy available on domestic sales of urea shall not be available for export of urea.
However, Ministry of Industries & Production has now clarified that the quantity of 41000 MT stuck at the port since October 31, 2017 is not part of the strategic reserves. The Ministry of Industries & Production further requested the Commerce Division to submit the case before the ECC for allowing extension in time up to February 10, 2018 to export the remaining quantity of urea i.e. 41,000 MT.
With the extension in export deadline, 35,564 tons of urea that had already been transferred to Karachi for export in October could not be shipped by January and was subsequently shipped under the same contracts to the same customers in Sri Lanka.
The company is of the view that SBP in order to facilitate exports condones the delay and penalties in export reference provided export value in full received. It may further be added that no loss has occurred to the national exchequer and there was no element of subsidy involved in export of urea.
According to sources, full export proceeds of $7,555,832 were remitted and received by SBP thereby enhancing foreign exchange reserves of the GoP.
According to Fazal Ahmad Sheikh, Director Fatima Fertilizer Company Limited, urea export quota has been duly served within the ECC approved timeline and foreign exchange against the export has been duly received, requesting the SBP to refund related penalty of Rs 119,506,234 charged in October 2017.