Ministry, fertiliser industry discuss urea price reduction

Industry lobby pinpoints reasons for hike in fertiliser prices

KARACHI: The Ministry of Industries and Production held a meeting with the Fertiliser Manufacturers of Pakistan Advisory Council (FMPAC) to discuss the reduction in urea prices.

“The ministry told the fertiliser manufacturers that the government wants a reduction of Rs107 in the per-bag price of urea as the rates have been increased in the recent past,” FMPAC Executive Director Sher Shah said.

He added that the government was of the opinion that the fertiliser manufacturers had raised prices abruptly after it came to power in August 2018, terming the approach illogical.

Pakistan’s excess urea can fetch $250m in exports

He regretted that the government did not consider the withdrawal of subsidy for the fertiliser sector as well as the gas infrastructure development cess (GIDC) issue while discussing the prices. He added that the previous government had granted a subsidy of Rs156 per bag, which it withdrew in the budget announcement in 2018.

“Over time, former finance minister Ishaq Dar decreased the subsidy and increased the industry’s share to Rs100 per bag in 2017,” he said. “Even then, the government failed to pay the due amount of subsidy and Rs20 billion of the fertiliser sector got stuck with the government.”

The current government wanted to reduce the price of urea for its own political interests and to make farmers happy, remarked Shah.

Former finance minister Asad Umar had agreed to waive 50% of GIDC arrears of the industry but when the government approved it, the issue became controversial and the prime minister withdrew the ordinance issued in that regard.

Fertiliser price expected to rise by Rs200 per bag

“In July 2019, the gas price was also increased for the fertiliser sector, causing an impact of Rs210 per bag, however, the industry did not pass the impact on to consumers till September 15 as it anticipated the adjustment of GIDC arrears.”

He decried that for two and a half months (July 1 to September 15), the industry booked losses of Rs4 billion.

The withdrawal of GIDC ordinance caused an impact of Rs400 per bag of urea while the hike in gas prices contributed Rs340 to the price, he claimed.

In the meeting, the industry suggested that the government should reduce the GIDC and gas prices, which were the main causes behind the hike in urea prices. 

Published in The Express Tribune, November 27^th, 2019.

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