ISLAMABAD: Prime Minister Shehbaz Sharif has deferred ratification of the ECC decision with respect to increase in dealers’ margin of imported urea after the Ministry of Industries and Production was grilled for giving benefit to fertilizer industry instead of farmers.
On August 16, 2022, during discussion on decisions of the ECC, the Minister for Finance/ Chairman ECC requested that ratification of decisions of ECC taken in its meeting held on July 28, 2022 may be deferred. Discussion on ECC decisions of August 11, 2022 ensued and the Prime Minister enquired about the impact on fertilizer prices with respect to the decision of the ECC in the item titled revision of price of imported urea.
Official sources told Business Recorder that the Secretary, Industries & Production explained that the increase was only in dealers’ margin for imported urea and most of the stocks had already been sold. The Prime Minister desired a separate briefing, in detail, on the matter and thereafter the ratification of the Cabinet could be sought through circulation.
On August 11, 2022, criticism came at a recent meeting of the ECC when a summary of MoI&P on revision of price of imported urea came under discussion on August 11, 2022.
“Minister of Commerce, Minister of State for Petroleum and Minister of State for Finance observed that the real purpose of the subsidy was to provide relief to the farmers, which was not being met as envisioned, rather fertilizer manufacturers were capitalizing on the subsidy,” the sources added. The ECC urged the need for rationalization of prices.
Subsidy on fertilizer: MoI&P heavily censured for benefiting manufacturers
Ministry of National Food Security & Research also observed that MoI&P did not consult the Ministry on the proposal as required under the terms of rule of Rules of Business, 1973.
Ministry of Industries & Production, in its summary, stated that the Dealer Transfer Price (DTP) for imported urea was fixed at Rs 1718/bag (exclusive of dealer margin of Rs 50/bag) in February with approval of the ECC, later ratified by the Federal Cabinet.
The Ministry added that the retail urea price increased to Rs 1950/ bag (inclusive of dealer margin of Rs 145/bag). Since price of imported urea stored in National Fertilizer Marketing Ltd (NFML) warehouses was lower than locally manufactured urea, NFML proposed to remove disparity between prices of imported and locally manufactured urea by revising the price of imported urea upwards.
Ministry of Industries and Production proposed the following: Dealer Transfer Price (DTP) of 50 kg imported urea bag may be revised upwards at Rs 1805/bag by NFML (exclusive of dealer margin of Rs 145/ bag) for the stocks sold between June 23 and July 25, 2022. Further, as recommended by Finance Division, DTP of remaining stocks held with NFML, may further be revised upwards to Rs 2150/ bag (exclusive of dealer margin of Rs 50/ bag) from July 26, 2022.
The MoI&P proposed an increase of 18 percent in incidental charges by NFML to Rs 538 per bag from Rs 456 per bag. This includes revised transportation charges of Rs 320 per bag, TWPP of Rs 75 per bag and stock handling warehousing and labour of Rs 161 per bag.
The ECC approved the proposal of MoI&P with respect to increase in urea prices being sold by NFML with the following directions: (i) Ministry of Industries & Production to seek prior approval of the ECC for fixing urea pricing and dealer margin in future; and (ii) considering the requirement of DAP fertilizer in the country and the higher international prices, TCP should assist private sector to procure DAP fertilizer at G2G rates without any cost to the government.
Copyright Business Recorder, 2022
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