PTI govt considers exempting fertiliser sector from GIDC

Industry says cost of urea production will rise after gas price hike

ISLAMABAD: The federal government is mulling over ending the Gas Infrastructure Development Cess (GIDC) on the fertiliser industry. On the other hand, it is also considering giving subsidy directly to farmers.

Speaking in a meeting on Monday of a committee formed by the cabinet to review fertiliser prices, Minister for Planning, Development and Special Initiatives Asad Umar said currently the government was giving a hefty subsidy to the farmers in a bid to provide them cheap fertiliser.

However, it seemed that there was a need to further discuss the subsidy mechanism, he said, adding that it would be more beneficial if it was provided directly to the farmers. Umar said the government believed in deregulation of various sectors of the economy and solicited proposals from representatives of the fertiliser industry for deregulating the sector.

Representatives of the fertiliser industry briefed government officials on the capacity and potential of their manufacturing units and the issues faced by them. They assured them that they would deliberate and present their proposals to the government within two weeks.

They said the increase in gas prices proposed by the Oil and Gas Regulatory Authority (Ogra) would have a direct impact on the cost of urea production and would cause a rise in fertiliser prices for the farmers. Meeting participants focused on current urea availability and prices in the country with special focus on the increase in gas prices recommended by Ogra and its impact on the cost of urea production.

Government officials emphasised that the gas price increase was necessary as the subsidies being provided as a relief in gas tariffs were not sustainable. These subsidies had been borne by the government and caused a dent in state earnings.

They also pointed out that gas prices were being hiked in the wake of additional revenue requirements of the two public gas distribution companies - Sui Southern Gas Company and Sui Northern Gas Pipelines. However, no conclusion could be reached on the gas price hike and the consequent increase in urea prices. Meeting participants agreed that a similar huddle would be scheduled in the coming weeks for arriving at a consensus. 

Published in The Express Tribune, December 24^th, 2019.

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