Engro Fertilizers CEO says Rs390 cut expected

Rs50 to be borne by manufacturers, remaining to come from govt and reduction in GST

KARACHI: The government’s concessions to the fertiliser sector and its all-out support for agriculture will result in a cut of Rs390 per bag in the price of urea, said Engro Fertilizers CEO Ruhail Mohammed.

“Yes, fertiliser prices are being reduced by around Rs390/bag, which is a 20% cut over the prevailing prices,” said Mohammed in a company statement. “Of the total price cut, Rs50 is being borne by the manufacturers, whereas the remaining will come from reduction in GST and subsidy from the government,” added the statement.



The government has proposed Rs36 billion as subsidy on urea, a cut in sales tax from 17% to 5% and a cap in gas tariff in the budget for 2016-17. The move is meant to support farmers who saw the agriculture sector contract in the outgoing year.

Fertiliser sales, which have taken a hit during the current quarter, are expected to increase after the measures. Prices are likely to come down from the current Rs1,800 per bag to Rs1,410 per bag by the start of the next fiscal year, Mohammed said in the statement.

The government proposed that urea fertiliser price be brought down to Rs1,400 per bag, from Rs1,800 per bag, and Di-ammonium Phosphate (DAP) from Rs2,800 to Rs2,500 per bag.

Mohammed said that the manufacturers want to remove GST on natural gas, since without this the fertiliser manufacturers will be in a constant GST-refund situation.



Fertiliser companies had already taken a hit on the margins by absorbing gas price increase in September last year, and fall in prices would further reduce the manufacturers’ margins at least by Rs50 per bag, he added.

Industry officials say manufacturers have around 1.5 million tons of urea, excluding 0.27 million tons held by the National Fertilizer Marketing Limited.

Published in The Express Tribune, June 22^nd, 2016.

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