Fer­tiliser prices to be re­duced by Rs390/bag: En­gro chief

Pakistan Observer - - ECONOMY WATCH - STAFF RE­PORTER

IS­LAM­ABAD—The gov­ern­ment’s Rs36 bil­lion sub­si­dies on urea and mas­sive cut in sales tax has rekin­dled hopes of a 20 per­cent fall in do­mes­tic fer­til­izer prices dur­ing the up­com­ing crop sea­son, an­a­lysts said on Tues­day. “Yes, Fer­til­izer prices are be­ing re­duced by around Rs390/bag, which is a 20 per­cent cut over the pre­vail­ing prices,” said Ruhail Mo­hammed, Chief Ex­ec­u­tive Of­fi­cer of En­gro Fer­til­iz­ers. “Of the total price cut, Rs50 is be­ing borne by the man­u­fac­tur­ers, whereas the re­main­ing will come from re­duc­tion in GST (Gen­eral Sales Tax) and sub­sidy from the gov­ern­ment,” Ruhail said in a com­pany state­ment.

The gov­ern­ment has pro­posed Rs36 bil­lion sub­si­dies on urea, cut in sales tax to five per­cent from the cur­rent 17 per­cent and a cap in gas tar­iff in the bud­get for the fis­cal year 2016/17. The move is likely to re­sult in Fer­til­izer prices plung­ing from the cur­rent Rs1,800/bag to Rs1,410/bag by the start of the next fis­cal year. The gov­ern­ment, in the Fi­nance Bill for the next fis­cal year, pro­posed that urea Fer­til­izer price be brought down to Rs1,400/bag, from Rs1,800/bag, and DAP from Rs2,800 to Rs2,500/bag to help ease fi­nan­cial pres­sure on farm­ers wrought by per­sis­tently low agri­cul­ture growth.

Ruhail said the man­u­fac­tures want to re­moval of GST on nat­u­ral gas, as with­out the move “the Fer­til­izer man­u­fac­tur­ers will be in a con­stant GST-refund sit­u­a­tion.” “Fer­til­izer com­pa­nies had al­ready taken a hit on the mar­gins by ab­sorb­ing gas price in­crease in Septem­ber last year, and fall in prices would fur­ther re­duce the man­u­fac­tures’ mar­gins at least by Rs50/bag.”

In­dus­try of­fi­cials said man­u­fac­tur­ers have around 1.5 mil­lion tons of urea, ex­clud­ing around 0.27 mil­lion tons held by the Na­tional Fer­til­izer Mar­ket­ing Lim­ited. “This level may slightly come down post July pe­riod, how­ever, the in­dus­try will see pilling in­ven­to­ries up to one mil­lion tons at the end of the on­go­ing fis­cal in the ab­sence of any mea­sures to ex­port,” Ruhail added.

“Fer­til­izer man­u­fac­tur­ers have a po­ten­tial to bring in for­eign ex­change of more than $200 mil­lion if urea ex­port is al­lowed.” Ruhail Mo­ham­mad fur­ther added “The stake­hold­ers are in the process of tak­ing up the ex­port is­sue with the gov­ern­ment and ex­pects that “a ra­tio­nal de­ci­sion for the ben­e­fit of the coun­try will be made.” The gov­ern­ment has fo­cused on re­viv­ing the agri­cul­ture sec­tor which showed a neg­a­tive growth of 0.19 per­cent due to slow down in in­ter­na­tional com­mod­ity mar­ket. The gov­ern­ment also opted to pro­vide grow­ers cheaper in­put to help en­hance the pro­duc­tiv­ity of the farm sec­tor. In­dus­try of­fi­cials said the an­nounced in­cen­tives, along with the sum­mer crop sea­son would foster de­mand for urea in the coun­try. “De­mand for this year was fore­cast at around 5.3 mil­lion tons be­fore the price de­crease which is now ex­pected to be some­where close to 5.5 mil­lion tons for this year,” Ruhail said. “Un­less there is a change in any other fac­tor, we will see the same lev­els next year.”

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