Ministry of Finance (MoF) has reportedly blocked a summary of the Ministry of Industries and Production (MoI&P) for the release of Rs 17.5 billion subsidy to locally manufactured and imported urea during 2010-11, well-informed sources told Business Recorder.
The Economic Co-ordination Committee (ECC) of the cabinet, in its meeting on March 8, 2011, presided over by the Finance Minister, Dr Abdul Hafeez Shaikh was informed that as per the ECC decision 0.225 MT urea was being imported by the Trading Corporation of Pakistan (TCP) for the current Rabi crop through a mix of Saudi Basic Industries Corporation (SABIC) facility and open tenders to meet the gap caused due to continued gas curtailment to domestic urea plants.
Distribution of imported urea is being done through National Fertiliser Marketing Limited (NFML/ NFC). The open tender for 100,000 MT, according to TCP is costing Rs 38,040 per ton or Rs 1902 per 50 kg bag landed. The SABIC consignment of 1, 25,000 will cost on average Rs 42040 per ton or Rs 2102 per 50-kg bag landed. Import through Gwadar would add an additional cost of about Rs 100 per bag.
NFML sold a total quantity of 9, 79,559 tons in calendar year 2010 and has been maintaining a price differential with the domestic sector at Rs 30 per 50 kg bag in March, 2010, Rs 50/50 kg bag in May 2010, Rs 240/50 kg bag from January 1 to -26- 2011 and Rs 50-/50 kg bag from January 27 to February 24, 2011.
ECC was also informed that the government subsidy of Rs 12.74 billion was payable during 2010 on the import of 10, 00,000 tons of urea. Also import of 0.225 million tons of urea involves subsidy component of about Rs 4.69 billion. This implies that the GoP has to release about Rs 17.43 billion.
Secretary Finance observed that the proposal involved revision of sale price of imported urea as well as subsidy component with financial implications and therefore, views of finance ministry should have been obtained. ECC, accordingly observed that after due consultation with the ministry of finance, the sponsoring ministry may submit the summary in its next meeting.
ECC after detailed discussion and hearing the viewpoints of MoF and MoI&P deferred the case till the next meeting and directed that a summary containing views of the former be submitted, the sources maintained. The National Assembly has recently been apprised that the government had allocated Rs 800 million subsidy for the manufacturers of phosphatic and potassic fertilisers while Rs 200 million subsidy for importers was earmarked in the federal budget.
According to the MoI&P, the government provides feed gas to fertiliser sector at low rate ie Rs 102 per mmbtu as compared to industrial rate of Rs 382 per mmbtu. The annual consumption of feed gas by fertiliser industry stands at 111,227,950 mmbtu. In this way total annual implicit subsidy in the form of cheaper feed gas comes to Rs 31.14 billion.
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