Daily Times

Sir: This letter is in response to the news being circulated in the Media regarding misrepresentation of the facts related to surge in urea prices. I would like to begin with the fallacy that urea prices are being raised arbitrarily.

This price adjustment was bound to occur due to the short term policies of the PML-N government coming to an end on the 30th of June 2018.

The structure or breakdown of the price adjustment was based on the following facts: The government in Finance Bill 16-17 reduced the price of Urea from Rs 1790 and capped the price at Rs 1,400 per bag. This move took place under the following subsidy scheme: a voluntary reduction of Rs 50 by the manufactures, Rs 184 as the impact of GST reduction from 17 percent to five percent, and a subsidy of Rs 156 per bag, offering a total relief of Rs 390 per bag. Subsequently, the government revised the subsidy scheme through the Finance Bill 2017-18 and reduced the subsidy to Rs 100 per bag, while keeping the price at Rs 1,400, thereby implying that the manufacturers bear a further burden of Rs 56 per bag with total contribution of Rs 106 per bag and Rs 13 Billion in total. In the recent past, the reduction of GST on urea from five percent to two percent in the Finance Bill 2018-19 and a withdrawal of the subsidy, led to the price increase by Rs 52 per bag from July 1st 2018. Upon termination of the subsidy on July 1st, the manufacturers were supposed to recover Rs 106, plus they passed on the impact of the withdrawal of subsidy and GST adjustment (Rs 52) to the public. Therefore, the minimum price increase was to be effected by Rs 158 per bag.

Keeping in mind the impact of inflation and the Dollar Rupee parity among other costs, the prices were bound to rise higher than the present adjustment of Rs 130 or so per bag. In light of these calculations, it is clear that the news of price increase is exaggerated. It may also be noted that international prices of Urea are hovering around Rs 2300 per bag.

Fertilizer manufacturing is strategically one of the most important industries for an agrarian economy like Pakistan. If the government shows indecisiveness towards creating consistent policies and keeps ignoring the advice of the farmer’s community, fertilizer experts and learned associations, this essential sector will continue to suffer.

Presently three fertilizer plants are not operative due to unavailability of sustainable supply of gas at affordable rates. This is reflecting the unconcerned and compartmental policies for this strategic sector.

SYED FAKHIR ALI

Lahore

Published in Daily Times, July 19^th 2018.