The local fertilizer industry has increased urea prices by Rs 200 per bag taking the price to Rs 2210 per bag, after the u turn on GIDC Ordinance by the government. The government has already requested the Supreme Court of Pakistan to conduct early hearing of the GIDC case. This issue was taken up at the cabinet level where Abdul Razak Dawood was directed to hold a meeting with the fertilizer industry and bring the price of urea to Rs 1810 per bag.
"If feedstock price is reduced to previous Rs 185 from Rs 300 per MMBTU and fuel price raised from Rs 1021 to Rs 1180, it will reduce the selling price of urea by Rs 70-80 per bag, without any impact on revenue collection," said one the participants in the meeting. Insiders claimed that Prime Minister Imran Khan is not being properly briefed about the main reasons for the increase in urea price which is directly related to gas prices.
Fauji Fertilizer, one of the key urea manufacturers, in a letter to Abdul Razak Dawood, praised him for actively supporting the fertilizer industry on GIDC issue, which according to the fertilizer firm, was unfortunately derailed inspite of win-win situation for the government, the farmers and the industry. The fertilizer company further argued that a study of gas prices provided to the fertilizer industry worldwide reveals that Pakistani manufacturers are receiving the gas at almost double the price as compared with the Middle East. It is against the spirit of Fertilizer Policy 2001 and the farmers are the ultimate sufferers.
Gas forms the basic raw material for fertilizer manufacturing process and is consumed as fuel (20 percent) and feedstock (80 percent). The recent price revision (twice) led to higher cost of production, ultimately impacting on the end user (the farmers).
Fertilizer industry maintains that the price revision was driven by the quest for higher revenue targets without much deliberation in relation to its impact on end users (the farm community). The fertilizer industry believes that the impact on farmers can be minimized through reduction of gas price for fertilizer industry in the following manner: (i) the gas price increase should be minimal for feedstock, as its impact is four times more on the farmers and is further aggravated due to multifold financial load on old plants, since new plants are operating at a fixed price; and (ii) gas price slab( fuel) for fertilizer industry may be specified separately from other industrial sectors.
"We believe, in doing so, improvement in government revenue could be achieved through adoption of uniform fuel gas price across the board within the fertilizer industry. With this mechanism, if the government decides to pass on the benefit to the farmers, it may do so by reducing the feedstock price for the old plants," said the company secretary FFC, Brig Ashfaq Ahmed (retd).
