Further hike in urea prices likely as subsidy stays blocked

Industry warns prices will be increased by another Rs106 per bag

ISLAMABAD: The fertiliser industry has warned of a further increase in urea prices as the government is looking reluctant to release pending subsidy claims, which could prove a political setback for the current PML-N administration in upcoming general elections.

Fertiliser manufacturers increased the urea price by Rs100 per bag last week and they could jack up the price by another Rs106 following delay in the release of subsidy by the finance ministry, say industry players.

Finance Minister Miftah Ismail was also not paying heed to the demand from National Food Security and Research Minister Sikandar Hayat Khan Bosan, who wanted to provide relief for the crisis-stricken farmers.

As the Kharif sowing season has already got under way with cotton being its major crop, the urea price hike will dent the income of farmers. Already, during the current government of Pakistan Muslim League-Nawaz (PML-N), the cotton production has slumped to its lowest level in history because of lack of attention given to the farmers.

The fertiliser manufacturers, in a meeting held at the Ministry of National Food Security and Research on Friday, offered to withdraw the price increase if the government agreed on the payment of subsidy.

The main agenda of the meeting, chaired by the national food security minister and attended by industry representatives, was the increase in urea prices.

The minister listed the incentives given by the government for support of the industry, including the restructuring of sales tax on inputs in the budget for next fiscal year 2018-19.

He, however, voiced concern over the unilateral increase in urea prices that caused embarrassment for the outgoing government.

Responding to that, representatives of the fertiliser industry gave a rundown of the events since the inception of subsidy scheme in 2016 and the industry's contribution of Rs106 per bag.

They highlighted the difficulties faced in processing subsidy claims and the resultant financial cost borne due to delay in payments. They pointed to the government's failure to meet its commitment and reluctance of the Ministry of Finance to release the subsidy.

On July 24, 2017, the Prime Minister's Office had given the directive for subsidy payments at a ratio of 80:20 but, according to the industry, it had not been followed in true letter and spirit.

While payment of 80% subsidy was pending, nothing was heard about the third-party validation process for the remaining 20%, they said.

They told the meeting that the price should have been raised by over Rs200 per bag, adding the Prime Minister's Office had been cautioned on March 29, 2018 about potential rise in prices after April 15 in case of further delay in the release of outstanding subsidy.

"The industry has exercised prudence for all these days. However, with no response from the government, it is constrained to revise prices to partially mitigate the liability and recover losses," a fertiliser company representative said.

The Ministry of National Food Security secretary highlighted the relief measures taken by the government for the industry like provision of subsidised gas, permission for exports and restriction on imports.

The secretary revealed that he had processed subsidy cases for the release of 80% of the claims up to February for financial year 2017-18 and voiced hope that funds amounting to Rs4.74 billion would be received in a couple of days.

He called the finance minister during the course of the meeting during which the national food security minister talked about the release of subsidy. The minister asked the industry to support the government at the critical juncture, adding he would make concerted efforts for the release of remaining subsidy.

Published in The Express Tribune, May 12^th, 2018.

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