Clearance of overdue urea subsidy payments: ECC asks ministry to persuade provinces

ISLAMABAD: The Economic Coordination Committee (ECC) has directed the Ministry of Industries and Production (MoI&P) to take the lead in persuading the provinces to clear their overdue payments vis-à-vis share of subsidy on imported urea, sources told Business Recorder.

On December 18, 2024, the Commerce Division briefed the ECC that in pursuance of the ECC decision of July 20, 2022 and November 18, 2022 duly ratified by the Cabinet on July 21, 2022 and November 24, 2022 respectively, the Trading Corporation of Pakistan (TCP) imported 200,000 MT and 195,000 MT of urea and supplied it to National Fertilizer Marketing Limited (NMFL).

It was also decided that subsidy on imported urea would be shared at 50:50 basis, ie, 50% to be borne by Provinces while other 50% by the Federal Government.

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Accordingly, Commerce Division had initiated a summary for the ECC on January 21, 2024, whereby Rs 6.00 billion was released by Finance Division. TCP had then approached the Ministry to obtain approval of the remaining subsidy shares i.e. 50% subsidy share of the Federal Government against the import of 200,000 MT urea amounting to Rs 8.219 billion (including markup up to September 30, 2024), and for import of 195,000 MT urea amounting to Rs 17.014 billion (including markup up to September 30, 2024 for a total of Rs 25.233 billion).

As for the provincial governments, TCP had worked out the 50% subsidy share of the provincial governments, ie, import of 200,000 MT urea amounting to Rs 14.656 billion and for import of 195,000 MT amounting to Rs 17.014 billion (for a total of Rs 31.67 billion).

The Finance Division had proposed to initiate approval of Rs 10.00 billion through Technical Supplementary Grant on Import of urea fertilizer.

As regards the recovery from the provinces on 50:50 basis, Finance Division shall extend all support for timely clearance of the dues of TCP and NFML. With regards to MoI&P, it has been informed that Punjab and KP had agreed to share the subsidy or 50:50 basis, however no amount has been released so far. Whereas, Balochistan and Sindh had conveyed their dissent to share the 50 percent cost of subsidy on imported urea.

The Commerce Division submitted following proposals for consideration and approval of the ECC:

(i) Finance Division to release Rs 10.00 billion immediately to Commerce Division and arrange additional funds for settlement of the remaining balance in the Current Financial Year 2024-2025 to reduce the accumulated financial burden on TCP ;

(ii) Governments of Punjab and KP may again be issued directions for timely release of amounts for their share of the subsidy on 50:50 basis and

(iii) in light of refusal conveyed by the Government of Sindh and Balochistan to pay their share of subsidy in the imported urea, Finance Division and Industries & Production Division may devise a mechanism for recoveries against each province.

During the ensuing discussion, the Commerce Division informed the forum that the cost of importing Urea was to be shared equally between the Federal Government and the provincial governments. The Commerce Division also communicated that Punjab and Khyber Pakhtunkhwa had already agreed to the sharing of subsidy however, both provinces had not yet released their respective share amounts.

Furthermore, Sindh and Balochistan had declined to share the subsidy. That non-fulfillment of due obligations by the provinces had caused incurring of additional interest on the borrowed money. There was unanimity of view that the provinces should be urged to clear their outstanding payments. The forum was apprised that providing gas to fertilizer plants at subsidized rates had also resulted in accumulation of circular debt.

The Finance Division endorsed the proposal to release of PKR 10.00 billion immediately further informing that the remaining liability of Rs 15.00 billion would be cleared depending upon the fiscal space, either in the last quarter of the current Financial Year or as part of the following budget.

After detailed discussion the ECC approved technical supplementary grant of Rs 10 billion for Commerce Ministry and the Ministry of Industries and Production to take the lead in persuading the provinces to clear their overdue payments vis-à-vis share of subsidy. The Finance Division would provide required assistance in the matter.

Copyright Business Recorder, 2024