Home »Agriculture and Allied » Pakistan » Fertilizer subsidy not yet paid

The government of Pakistan is still dragging on the issue of fertilizer subsidy claims as billions of rupees in subsidy payments are stuck up due to institutional lethargy. One month has passed since the Ministry of National Food Security & Research (MNFS&R) was directed by the Prime Minister's office to release all the pending amounts urgently, but still nothing has been done to reduce the financial burden of the industry.

According to fertilizing industry sources, it was decided in a high-level meeting at the PM Office, chaired by Secretary to PM Fawad Hassan Fawad on July 24, that 80 percent of the total subsidy claims will be immediately released and remaining 20 percent will be paid within three months after third party validation. To the much frustration of industry, the payments are still pending, with lame excuse of non-availability of funds. Whereas the finance division has already released the requisite amount, thus holding of payments does not make much sense, the sources claimed.

Similarly, for future subsidy mechanism, the sources added, the government has included an unnecessary restrictive clause in the scheme where it asks for National Tax Number (NTN) of every fertilizer dealer. This clause makes this scheme non-viable as it ignores the fact that a big majority (over 90 percent) of the smaller dealers are not registered with the taxation authorities and do not have NTNs. Moreover, the subsidy claims are based on sales tax, which has no relationship with NTN. Hence, such a step may ultimately hamper the distribution of Urea denying the subsidy-benefits to the farmers, the sources added.

Fertilizing industry circles claimed that authorities have not even started the external-audit process required to resolve this subsidy-crisis, which is debilitating for the national economy. The MNFS&R has still not issued the terms of reference (TORs) about this external audit of the fertilizing industry.

Although the fertilizing industry is facing numerous cash-flow challenges, created by more than 20 billion rupees of outstanding subsidies, these companies have kept the urea prices down in the Pakistan market. The fertilizer producers are cooperating with the government by absorbing 106 rupees per bag to keep the prices low, although the government has promised to pay Rs 100 per bag as subsidy, the industry sources added.

The Fertilizer Manufacturers of Pakistan Advisory Council (FMPAC) reiterated the industry's pledge to work with the government to resolve the subsidy crisis. The official further said: "The government must appreciate that the fertilizing industry is the highest contributor to the national exchequer, as it plays a vital role in agriculture growth. The fertilizer companies are waiting patiently for a favourable response from the government. We have not disrupted the supply of subsidized fertilizers to the farmers, despite the major cash-flow problems we are facing."

An amicable solution of this subsidy crisis is eagerly awaited. The concerned officials must take personal interest in this matter to ensure that the benefit of this subsidy continues to reach the farmers, and the supply of urea in the market remains uninterrupted. The Ministry of Finance, FBR, State Bank and the MNFS&R are expected to accelerate their efforts to reduce this financial pressure and simplify the procedural complexities in the subsidy scheme, the fertilizing industry concluded.



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