The government has reportedly decided to conduct cost audit of fertilizer industry prior to proposing reduction in urea prices, well-informed sources told Business Recorder.

The decision was taken at a meeting of a committee headed by Abdul Razak Dawood, Prime Minister's Advisor on Commerce |and Industries and Production and Investment. Minister for National Food Security and Research, Khusro Bakhtyar, Prime Minister Special Assistant on Energy, Nadeem Babar and Chairperson Competition Commission of Pakistan (CCP) and officials attended the meeting. A few days ago Prime Minister Imran Khan while taking a notice of increase in fertilizer prices, constituted a committee under the chairmanship of Abdul Razak Dawood and comprising Minister for National Food Security and Research, Minister for Planning, Development and Special Initiatives, PM Advisor on Energy and Chairperson on Social Security and Poverty Alleviation. The committee will submit its recommendation to the Prime Minister next week.

The sources said the meeting discussed different scenarios and proposals to prepare recommendations for the Prime Minister. Abdul Razak Dawood left the meeting early after he was called by the Prime Minister.

"No strategy has so far been framed by the committee as some homework has yet to be done to finalize recommendations," the sources added.

The committee is evaluating whether the current increase in urea price was the result of increase in gas prices or re-imposition on Gas Infrastructure Development Cess (GIDC).

"We will conduct cost audit of fertilizer industry after which recommendations to be finalized," the sources maintained.

Insiders claim that another meeting has been held by the Minister for Planning, Development and Special Initiatives, Asad Umar, who previously was against increase in urea prices and approved GIDC payment formula which was later approved but scrapped after criticism.

Prime Minister Advisor on Commerce, Industries and Production and Investment also held meetings with the fertilizer industry and requested them to reduce price but he failed to get any relief for the farmers despite the fact that he arranged RLNG at cheaper rates to the two fertilizer plants.

According to cost analysis, the price of urea per bag has been calculated at Rs 1496 per bag of different companies whereas the cost of FFC was Rs 1525 per bag. These prices are inclusive of GIDC and other taxes.

Meanwhile, SNGPL which supplies RLNG to two fertilizer plants has sent a letter titled "release of subsidy amount against RLNG supply to two to the fertilizer plants, ie, Fatimafert and Agritech".

According to SNGPL, on the basis of letters from MoI&P, both fertilizer plants were making daily advance payments against RLNG supplies at the subsidized rate of Rs 945/MMBTU instead of RLNG notified price due to which the company is facing severe financial constraints and is unable to fulfill its commitments towards upstream RLNG suppliers.

SNGPL has requested the Petroleum Division to approach the Ministry of Finance for the immediate release of subsidy amount of Rs 1,281, 900,706 against gas supplies to both fertilizer plants for the period from November 1, 2019 to November 20, 2019 on urgent basis so that payments could be made to upstream RLNG suppliers.

The sources said subsidy claims against both fertilizer plants have also not been received despite lapse of considerable time due to which the company is facing financial constraints to liquidate outstanding dues of upstream RLNG suppliers. The company has requested that an amount of Rs 10,284,627,007 to be arranged immediately.

Copyright Business Recorder, 2019