Apropos a news item carried by Business Recorder yesterday, the Fertiliser Manufacturers Pakistan Advisory Council has clarified: “Currently, the domestic producers are selling urea for Rs 1,659 inclusive of GST(Rs 237 per bag), which is significantly lower than international urea prices.
“Although the government is selling imported urea at Rs 1, 600 per bag, the average price of international imported urea during January to September 2012 remained around Rs 2, 990 per bag. This means a loss of Rs 1, 390 per bag to government on imported urea, which ultimately is borne by taxpayers and precious foreign exchange is going to foreign fertiliser manufacturers.
“Feed gas for fertiliser sector is no more that much subsidised as Fertiliser sector is paying the highest cess of Rs 197 per mmbtu on feed gas and Rs 50 per mmbtu on fuel portion of gas. Earlier price of Rs 102 per mmbtu on feed gas has now been raised to around Rs 313 per mmbtu. Despite this massive increase of 207%, fertiliser industry is maintaining a subsidy level for the farmers. “Fertiliser industry is receiving a feed gas subsidy of about Rs 216 per bag. Therefore, despite unprecedented gas curtailment, domestic producers have passed on Rs 1, 331 per bag (2,990 – 1659 = 1,331) of benefit to farmers, which is six times the feed gas subsidy received by the government.
“This is despite the fact that all fertiliser plants have received curtailed gas throughout this year and the four plants on SNGPL network remained shutdown except for about a month and a half during 2012. “Fertiliser industry has invested $2.3 billion in new production facilities saving precious foreign exchange and giving jobs to thousands as a result. A larger part of the investments has been financed through debt (both local banks and foreign lenders). Fertiliser industry has been passing on significant benefit to the farmer over the last many years by selling urea at a significantly lower price as compared to international prices.
“In total, farmer received a benefit of about Rs 280 billion over the last three years (About Rs 500 billion over last five years) in the form of lower domestic urea prices. Out of this, about Rs 100 billion (Rs 140 billion over last five years) was provided by the government in the form of feed gas subsidy while the remaining Rs 180 billion (about Rs 360 billion over the last five years) was passed on voluntarily by the industry over and above the feed gas subsidy. “Fertiliser manufacturers believe if continuous gas is supplied to the plants, a further drop in prices can be expected thereby, helping farmers and the agriculture sector significantly,” the press release concludes.
Copyright Business Recorder, 2012