Fertiliser-makers reduce urea prices

Slash urea rates in the range of Rs150 to Rs300 per bag

KARACHI: Following the abolition of gas infrastructure development cess (GIDC), fertiliser manufacturers have reduced urea prices in order to pass the benefit on to farmers - the major fertiliser buyers.

Fauji Fertiliser Company (FFC) and Fauji Fertiliser Bin Qasim Limited (FFBL) reduced urea prices by Rs300 to Rs1,700 per 50kg bag. Similarly, Engro Fertilisers pushed down its urea price by Rs150 to Rs1,850 per bag.

"All the companies reduced their prices according to the cess imposed on them," said Saqib Hussain, research analyst at Sherman Securities.

According to the Fertiliser Policy 2001, Engro Fertilisers and Fatima Fertiliser were granted a GIDC concession for installing new urea manufacturing plants. The aim of the policy was to increase the number of companies in the market which would give a wider choice to the farmers.

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Both the companies were set up after 2010 and their concession would end around 2022. Therefore, Engro Fertilisers and Fatima Fertiliser were paying only Rs160 in GIDC while the other two companies were paying Rs400.

According to a source, the current situation has created an impression in the market that the older fertiliser producers were the force behind the elimination of the cess. Meanwhile, the new companies have lost their advantage.

Prior to this development, all the fertiliser companies were selling urea bags at around Rs2,000. With the current development, FFC and FFBL have reduced their prices to Rs1,700 by adjusting Rs100 considering the upcoming gas price hike by the government.

The Oil and Gas Regulatory Authority (Ogra) has recommended to the government to increase gas prices from 5-15% for different consumer categories. However, the Economic Coordination Committee (ECC) has still not made any decision yet.

Keeping in view the forthcoming increase in gas prices, FFC and FFBL have reduced urea rates by only Rs300 instead of Rs400, according to Hussain.

According to a statement issued by Engro Fertilisers, "on account of its massive investment of over a billion dollars in the setting up of a state-of-the-art new fertiliser plant, the company receives gas under fixed-price contracts, which do not attract GIDC.

"The impact of a prospective reduction in GIDC is, therefore, lower in the case of Engro Fertilisers, as compared to FFC."

Published in The Express Tribune, February 1^st, 2020.

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