Most of the fertiliser plants are getting dedicated gas supply but they have been raising prices on the pretext of gas shortage in the country. PHOTO: FILE
A committee, constituted by the Economic Coordination Committee (ECC) of the cabinet, has found that new fertiliser manufacturing plants have pocketed billions of rupees from farmers with a sudden increase in urea prices on false claims of a rise in Gas Infrastructure Development Cess (GIDC), sources say.
In addition to the manufacturers, dealers also made billions at the expense of farmers, who were on the receiving end.
However, the urea manufacturers, which had revised prices on January 1, later agreed to reduce them following warnings by the committee that the increase in GIDC could be collected from their profits.
Most of the fertiliser plants are getting dedicated gas supply but they have been raising prices on the pretext of gas shortage in the country.
According to the sources, the new fertiliser plants were exempted from GIDC but they increased prices following revision in the cess rate.
According to documents available with The Express Tribune, the committee, in a meeting of the ECC on January 16, said the increase in GIDC would not apply to the new fertiliser plants, which accounted for a significant part of total production.
It found no justification for the rise in urea prices from Rs1,722 to Rs1,900 per bag of 50 kilogramme.
Sharing the assessment made by the Planning and Development Division about earnings of the fertiliser industry, the committee told the manufacturers that if the need to collect the GIDC arose, the national interest would warrant such an arrangement.
As suggested by the committee, the fertiliser producers agreed to scale back urea prices and sell at Rs1,786 per bag.
Talking to The Express Tribune, a spokesman for Engro Corporation said Engro was paying GIDC because its new plant was getting gas at a higher rate of $3.3 per million British thermal units (mmbtu) from Mari gas field.
This was contrary to the ECC decision that called for providing gas at 70 cents per mmbtu as per contractual obligations, he said. Instead, those plants that were receiving gas at 70 cents per mmbtu were not paying GIDC, he claimed.
Price printing
The manufacturers were also asked to start printing prices prominently on fertiliser bags, to which they said all necessary arrangements had been put in place and every bag would prominently display the sale price from March this year.
The committee also took up the issue of urea sale at prices higher than that fixed by the companies. It would ask the Ministry of National Food Security and Research to coordinate with the provinces in devising an effective mechanism for ensuring uniformity between company-set and market prices.
Finance Minister Ishaq Dar, who is also the ECC chairman, told the meeting participants that the government was giving top priority to the agriculture sector and would protect the interest of farmers and the common man.
Accordingly, the fertiliser producers were approached to press them to slash urea prices, which were increased by about Rs175 per bag from January.
The ECC underscored the need for keeping a check on the activities of fertiliser distributors and for devising a system in collaboration with the provincial governments to control prices in the country.
Published in The Express Tribune, January 29th, 2014.
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So when will the small shareholders get this money? No dividend for almost two years.
Despite all the tears, engro is making billions in profits, crying foul of shortage of gas.
What Engro board and management doesn't highlight ever is that they get subsidized Feed gas for urea manufacture. Tax payers pay the subsidy (balance between Feed gas price and Normal gas price paid to gas supplier) so that the poor landlords get cheaper urea, landlords like Shahs, Makhdooms, Gillanis etc. who cant afford to buy urea at full price.
But out of this Engro gets lions share in profits. Technically Feed gas is what is actually converted into urea (a chemical engineering graduate can easily do the material balance) however, government bills any gas that goes through the primary reformer of Ammonia plant, as Feed gas, Engro and other urea manufactures purge the Feed gas off the Ammonia plant and mix into expensive fuel gas/utilities and power network thus using Feed gas as Fuel gas but paying 70% price. They make some profits out of this.....yea some 500 or so Million Rs every year.
Can you imagine how much money moves from the pockets of ordinary tax payers into the pockets of Urea manufacturers and filthy rich landlords every day?
What about punishing the culprits?
I am completely against any preferential treatment to any sector at the government level. BUT given we give gas to urea producer at dirt cheap prices (I have read estimates of about 5-10% of international current price), then their prices should be regulated since market forces are not being allowed to ensure reasonable profit. Rather, manipulation is resulting in immense profits.