Fertilizer, Pakistan Agriculture News

Industry rules out expected relief in urea price

Islamabad  –   Disagreeing with the finance minister’s claim that the GIDC reduction will help cut the urea prices by Rs 200 per bag, the fertilisers industry has said that the industry will not be able to pass the entire impact to the consumers and the price is likely to come down by Rs 100 per bag only.

Fertilisers industry has not been able to pass on the impact of GIDC in full to the urea consumers, therefore, expected relief in prices of urea may not be as envisaged in the Finance Minister supplementary finance bill speech, sources in Fertilizer industry told The Nation.

The price of urea can hardly be reduced by Rs 90 to 100 per bag, said the source.

According the calculation made by the fertilizer industry the GIDC impact per bag is Rs 385, price decrease (191) due to reduction in GST (from 16% to 2 %), price increase (Rs 148) due to non gas costs (salaries, maintenance etc.) based on 8% (avg.inflation), price increase of Rs 160 per bag due to increase in gas cost. The urea price if total cost is passed on to the farmers per bag is Rs 2082 per bag while the current price being charged from the consumer is Rs 1740 per bag. Price hit absorbed by the manufacturers is Rs 342 per bag which is 90 percent of GIDC imposed.

The minister for Finance, Asad Umar,  during mini budget speech announced that the government is reducing the GIDC on Fertilizer which will reduce the price Rs 200 per bag.

It is pertinent to mention here that GIDC has been imposed at the rate of Rs 300 per MMBTU on Feed Gas (used as raw-material for urea manufacturing). All the other sectors are being charged a GIDC of Rs 150 per MMBTU.

Separately in a letter to the Finance Minister fertilizer Manufacturer of Pakistan Advisory Council said that the  past GIDC on Fertilizer Sector between 1’t January, 2012 and the date of commencement of proposed amendment to the GIDC Act, shall be settled by waiving off fifty percent (50%) of the total GIDC, chargeable under various GIDC Ordinances / Acts as applicable from time to time, without any implications of related input GST.

Subject to continuity of GIDC regime for the gas consumers in the Country, rates of GI DC at Second Schedule of GI DC Act 2015 shall also be prospectively reduced by fifty percent (50%).

Any outstanding amount payable by the fertilizer companies shall be first adjustable against outstanding Su bsidy Claims receivables and GST refundables, in this priority, before the balance amount becomes payable.

Any excess amount already paid by the fertilizer companies along with Subsidy Claims and GST Refundable will be first adjustable against the future monthly payables on account of GIDC until fully exhausted. The amount of GIDC reversal by the fertilizer companies shall be recognized in the income on actual adjustment/receipt basis and applica ble taxes thereof shall also be payable in line with actual receipt/adjustment of the GIDC.