Government releases over Rs3.18 billion as fertiliser subsidy

The federal government has released an amount of over Rs 3 billion as fertiliser subsidy to the importers and manufacturers. Industry source told Business Recorder on Tuesday that after physical verification form Punjab, the Ministry of National Food Security & Research (NFS&R) has finally issued instructions to State Bank of Pakistan (SBP) for release of partial (pending) payments against Urea and DAP subsidy.
The Ministry of NFS&R, on last Friday, had issued an advice for payment of fertiliser subsidy claims for the period from 25th June to 30th November 2017 to sixteen importers and domestic manufacturers. While, payment of three suppliers has not been released as their claims'' verification is in progress.
According to M/o NFS&R letter sent to SBP, the ministry has requested SBP for payment of Rs 3.184 billion to fertiliser importers and local manufactures under the fertiliser subsidy scheme 2016-17 as government of Punjab has physically verified and fertiliser Cell of M/o NFS&R has reconciled the subsidy claims.
Overall some Rs 21.164 billion has been reconciled by the Fertiliser Cell of the ministry as DAP and Urea subsidy, out of which some Rs 6.546 billion have already been paid. While, recently the government of Punjab has verified another amount of Rs 6.5 billion, of which some 50 percent or Rs 3.18 billion is being released to the importers and domestic manufacturers. The released amount is likely to physical transfer into accounts of the fertiliser companies today (Wednesday).
Industry sources said the governments of Sindh, Khyber Pakhtunkhwa (KPK) and Baluchistan have still not submitted physical verification report of fertiliser subsidy to the ministry, of which billions of rupees subsidy claims are still in pending. The fertiliser cell of ministry of national food has reconciled Rs 21 billion subsidy and cumulatively an amount of Rs 9.73 billion (including current Rs 3.18 billion) has been released, they informed.
"The agony is the funds were placed by the Ministry of Finance at State Bank since August 2016, however the payment was delayed due to unknown reasons", they said. Fertiliser importers are facing financial difficulties due to delay in payment of billions of rupees subsidy and unable to further participate in DAP subsidy scheme. In addition, importers have an extra financial burden of interest payment to banks due delay in payments. While on the other hand the DAP prices in the world market are gradually increasing and surged by some $ 75 per metric tons to $390 per metric ton in the second week of February up from $315 per metric ton last month. "Delay in payment of subsidy and rising international prices is not allowing importers to contribute to the subsidy scheme anymore. Now, importers are not in a position to participate under the existing DAP subsidy scheme anymore", they said.
As the importers have stooped to place new import order, market is expecting shortage of DAP in March/April as the new prices will not allow the importers to import and sell the commodity at the government''s announced prices with subsidy. DAP is deregulated item and in case the government want to continue with subsidy to farmers then they should reduce the GST from 17 percent to 5 percent like they did with Urea. In addition, the government should devise a DAP subsidy scheme where fresh DAP subsidy can be given directly to the farmers instead of through importing companies, they suggested.
They mentioned that out of the 2.2 million tons of DAP off takes in calendar year 2016, around 64 percent was supplied to farmers through imports. It may be mentioned here that the government had announced fertiliser subsidy in budget 2016-17 and as per government''s commitment the subsidy claims will be paid within 15 days of receipt. However, contrary to commitment, the Ministry of National Food is delaying payments.