ISLAMABAD: The country's fertilizer industry has hinted at increase of urea price by Rs 200 per bag, if gas companies are allowed the requested raise in prices, industry sources told Business Recorder.
The gas companies SNGPL and SSGC have filed their petition for determination of gas prices for the year 2020-21. SNGPL has sought an increase in gas prices by around 100% (Rs 622/mmBTU), while SSGC has sought an increase of 20% (Rs 85/mmBTU) to meet their revenue requirements for upcoming fiscal year. If OGRA accepts the petition in its full, this will augment the burden on all industrial sectors and consumers of the country.
Fertilizer industry is of the view that as this will also face this gas price hike and the increase in gas cost would be passed on by the fertilizer industry, this would lead to a significant increase in the prices of essential fertilizers, especially urea.
Previously, in December 2019, OGRA had recommended an increase of 135% in fertilizer feed gas prices, along with 32% increase in fuel prices, which was further amended by the Ministry of Energy (Petroleum Division) to increase fertilizers feed gas price by 5% and fuel gas price to be increased by 64% to Rs 1,672/mmBTU. Although the proposal was not implemented by the government at the time, urea prices will go up by approximately by PKR 213/bag if the government goes forward to match the previously recommended gas price hike.
"The possible price hike is likely to compound the burden on farming community amid the COVID-19 slow down and severe locust infestation that has destroyed thousands of acres of cultivated areas," said one of the stakeholders. Urea offtake has drastically declined during the year due to worsening farm economics and the government's subsidy announcement due to which farmers have delayed purchase decisions. Further, the recent budgetary amendments in tax laws present serious challenges for the fertilizer industry which may require in a further increase in urea prices by Rs 200/bag. Any increase in cost of fertilizers caused by gas price hike would only add to the misery of farmers.
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