Fertiliser industry demands release of Rs19b in subsidy

Delay in payments leads to cash flow challenges, heavy borrowing cost for industry

LAHORE: The fertiliser industry has demanded that the Ministry of Finance clear long overdue subsidy claims of approximately Rs19.21 billion.

In a letter to Finance Minister Asad Umar, the Fertiliser Manufacturers Pakistan Advisory Council (FMPAC) appreciated the ministry’s interest in resolving the sector’s outstanding issues. It said the industry had abided by its commitment to the ministry that it would ensure reasonable prices in the past almost three years.

The government had announced the Kissan Package, which was aimed at supporting the farmers through the provision of subsidy and restructuring of sales tax on fertilisers.

Acting on the directives of the government, the industry said it passed on envisioned benefits to the farmers, besides ensuring a matching price support, thus keeping prices within the agreed limit of Rs1,400 per bag.



The government, however, has yet to reciprocate following the disbursement of subsidy to the farmers, resulting in cash flow challenges and heavy cost of borrowing for the industry, it said. “We request for your personal intervention to release the payments on priority, enabling the industry to continue support of the government through availability of fertilisers and affordability of prices,” stated the letter.

The association was of the view that major reasons for delayed payments were perceived to be non-conformity of three provincial governments with the schemes introduced by the federal government, undue procedural complexities on the part of the Ministry of National Food Security and Research and the Federal Board of Revenue (FBR), and cautious release of funds by the Ministry of Finance.

It added that on July 24, 2017 the PM Office had directed the release of 80% of pending subsidy claims immediately against indemnity bonds submitted by the companies, while the remaining 20% was to be released after third-party verification within 90 days. However, the directive was not implemented.

The fertiliser industry said besides passing the benefit of subsidy, the industry was also forced to bear an additional burden of approximately Rs18 billion - Rs106 per bag of urea - in order to keep prices restricted to the agreed limit.



In light of the foregoing, a total of around Rs19.2 billion in subsidy remains to be received by the industry till June 2018.

Published in The Express Tribune, October 7^th, 2018.

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