Ministry demands abolition of GIDC to control fertiliser prices

Urea and DAP prices have gone up more than 20% year-on-year

ISLAMABAD: The Ministry of National Food Security and Research has asked the government to abolish gas infrastructure development cess (GIDC) collected on gas supply to fertiliser plants, which has led to increase in urea prices in the country.

Already, the fertiliser industry had received Rs120 billion in GIDC from farmers but the Pakistan Tehreek-e-Insaf (PTI) government later waived payment of Rs60 billion. It also reduced the GIDC rate by 50% for the fertiliser industry if they agree on paying Rs60 billion of GIDC to the government.

“The Ministry of National Food Security and Research has submitted a proposal to the Economic Coordination Committee (ECC) of the cabinet, seeking abolition of GIDC following increase in fertiliser prices in the country,” a senior ministry official told The Express Tribune.

Prices of fertiliser have jumped in recent months in the country. Retail price of locally produced urea was Rs1,740 per 50kg bag in December last year, but it was being sold at Rs1,850 per bag in the black market. Now, the retail price has jumped to Rs1,900 per bag despite urea import by the government in December 2018 to control price hike.

Recently, the Ministry of National Food Security told ECC that by February 7, 2019 urea prices had gone up 28.8% or Rs403 to Rs1,900 per bag compared to the same period of last year. Similarly, the price of imported di-ammonium phosphate (DAP) fertiliser jumped up 21% or Rs626 to Rs3,569 per bag.

In the wake of the price hike, the ministry in a proposal to the ECC suggested the scrapping of GIDC applied on gas supply to fertiliser plants in order to absorb the impact of increase in fertiliser prices.

According to officials, total availability of urea in the current Rabi 2018-19 sowing season had been estimated at around 3.24 million tons, which included a stock of 115,000 tons, 105,000 tons of imports and 3.02 million tons of fresh domestic production. Urea demand was estimated at around 2.96 million tons and the closing balance was expected to be around 307,000 tons.

Production estimates for February and March were based on an ECC decision taken on January 1, 2019 for ensuring maximum gas supply to the fertiliser plants connected to the network of Sui Northern Gas Pipelines Limited (SNGPL). If gas supply to these plants is suspended, it will result in acute urea shortages.

Domestic DAP production for Rabi 2018-19 was estimated at 1.63 million tons whereas imports were calculated at 550,000 tons. DAP demand was expected to be about 1.25 million tons.

The supply-demand situation in respect of DAP and other phosphate fertilisers like SSP, NP and NPK appears to be satisfactory for the current Rabi sowing season.

Published in The Express Tribune, March 5^th, 2019.

Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.