CEO of Engro Fertilizers wants extension in export deadline

Says manufacturers are hoping policymakers will withdraw GST instead of giving subsidy on urea in upcoming budget

Farhan Zaheer May 07, 2017
Says manufacturers are hoping policymakers will withdraw GST instead of giving subsidy on urea in upcoming budget . PHOTO: FILE

KARACHI: Fertiliser manufacturers have asked the government to extend the urea export deadline until December 2017 to be able to get rid of their surplus production.

“We urged the government to extend the deadline in April, but they haven’t responded,” Engro Fertilizers Limited CEO Ruhail Mohammed said in an interview with The Express Tribune.

The government had allowed local manufacturers to export 300,000 tons of urea by the end of April 2017. At the end of the first quarter of calendar year 2017, only Engro Fertilizers had exported the urea to Eastern Africa region at an estimated Freight on Board (FOB) price of $230-240 per ton.

Local producers are looking at export opportunities in various regions including East Africa, Afghanistan and India amongst others. The international urea prices are expected to remain under pressure after a short-lived relief at the beginning of the year due to increase in demand from North America ahead of corn season in the region, according to a Taurus Securities report.

“There is no reason to panic if the government allows the export of 500,000 tons to 600,000 tons of surplus urea. At present, the industry has an inventory of about 1.5 million tons of urea,” said Ruhail Mohammed.

He added that the urea demand is expected to remain similar to last year or around 5.5-5.6 million tons by the end of this year. Farmer economics improved in 2016 compared to 2015 and the situation is expected to remain the same in 2017 which would keep the urea demand flat, he added.

Expectations from budget

“We have suggested to the government to withdraw General Sales Tax (GST) instead of giving subsidy on the urea”, he said, adding that this will save the industry from a number of issues.

The CEO said that the GST is almost equivalent to the subsidy the government gives on urea therefore, the replacement of the subsidy with GST would not make any difference on the market dynamics.

Commenting on the increase in Di-ammonium Phosphate (DAP) prices, he said the fertiliser companies never agreed to fix them with the federal government. “Since we sell imported DAP, we cannot fix its price. Similarly, the government should not fix prices because one cannot control the international prices of any commodity,” he added.

DAP importers have increased prices by Rs50 per 50 kg bag more than once in recent months due to the increase in international prices.

The confusion on fixing DAP prices was created by the Punjab government’s notification which had nothing to do with the position of the federal government. In fact, the federal government did not want to fix price. However, now the Punjab government has also conveyed to the federal government that it has no objection on the market determination of DAP prices instead of its earlier stance to fix it, he said.

Mohammed believes the government is not supporting the farmers other than just giving subsidy on fertilisers.

“The government should support the farmer community by helping them increase per acre yield. This will not only make Pakistan self-sufficient in food production but it can also export various commodities like wheat etc and earn foreign exchange,” he added.

Published in The Express Tribune, May 7th, 2017.

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