Intended projects: Govt should first spend already collected GIDC: fertilizer industry

ISLAMABAD: The fertilizer industry has said it was unable to pass on the impact of Gas Infrastructure Development Cess (GIDC) during the period of ten years due to price intervention by the government.

It has been explained that urea price in Dec 2011 was Rs 1,580 /bag just prior to imposition of GIDC. In Dec 2019 it was Rs 2,040 /bag indicating increase of Rs 460 /bag since imposition of GIDC. During the same period, impact of gas price increase (excluding GIDC), GST reduction and inflation had a net impact of around Rs 380 /bag.

"If full impact of GIDC imposed (Rs 400 /bag) had been passed on to the farmers, the price increase should have been Rs 780 per bag against the actual Rs 460 /bag only. Therefore, around Rs 320 per bag impact was absorbed by the companies which faced the maximum brunt of GIDC," the industry said in a communication.

"The DAP manufacturers (FFBL) could not pass through a single penny, as the imported DAP did not allow, due to competitive prices." According to the industry.

Fertilizer industry share in the overall natural gas consumption is 17% only. However, it has paid around 43% of the GIDC total collections made so far (Rs 295.4 billion). Therefore, fertilizer industry believes that it is prudent to request that the Government must expedite similar %age recovery from other sectors.

"The government should first spend already collected Rs 295.4 billion GIDC on intended projects before asking for more payments. Balance GIDC payments due till July 31, 2020 should be demanded from the industry only when there is a need to complete the pending work of these projects," the industry maintained.

It has been proposed to minimize adverse impact on industry, farmers, and agri-sector as whole; balance GIDC payments should be spread over a time period, which Government considers appropriate to complete the intended projects (say 5-7 years) instead of two years (24 installments). Fertilizer industry's total outstanding GIDC payments till July 31, 2020 should be adjusted for following heads: (i) pending subsidy payments ;(ii) pending GST refunds ;(iii) expenses already made by the companies for setting up their own gas infrastructure facilities and ;(iv) expense on fertilizers constitutes less than one-fifth of the total farm input costs.

Minister for Energy Omar Ayub has been requested that in order to improve the farm economics, the Government must look to lower other farm input costs as well, instead of focusing solely on regulating the fertilizer prices.

Copyright Business Recorder, 2020