DAP, urea prices: Importers made windfall profits, govt concedes
The government has conceded that there has been a massive increase in the prices of urea and DAP, which shows high profit margin of importers/industries on critical inputs for agriculture production. An official said that increase in the cost of input eventually translates into cost of commodities although the tax on all fertilizer products has been reduced from 17 percent to 2 percent.
Sources said that according to Food Ministry, an increase of 36 percent in price of urea was noted in October 2019 as opposed to a year before and DAP was being sold at Rs 3,712 as opposed to what it should have been Rs 3,080 on the basis of DAP price in the international market, higher by Rs 632 per bag.
The document shows that the urea price from Rs 1,500 per bag in June 30, 2018 increased to Rs 2,040 in October 2019, reflecting 36 percent increase. The urea manufacturing industry attributed the price increase to removal of cash subsidy, inflation, increase in gas prices and withdrawn of Gas Infrastructure Development Cess (GIDC).
The Ministry of Food added that DAP price in international market was US $ 418 per ton (FOB) in July 2018 and for the same month price of DAP in the domestic market was Rs 3,238 per bag. However, when the price in the international market slid to US $ 312 per ton in October 2019, equivalent to Rs 3,080 per bag, the price in the domestic market in principle was to be reduced but the price went up gradually to Rs 3,721 per bag during the first week of October 2019, which clearly shows high profit margin by importers/industries, the ministry added.
Sources said that the government had fixed urea and DAP prices at Rs 1,400 and Rs 2,500 per bag respectively in June 2016. However, revision in gas prices from time to time by the government and inflation caused urea and DAP prices to increase to Rs 2,040 and Rs 3,721 per bag respectively in October 2019.
However, the fertilizer has been a deregulated commodity since 1995 and as per Fertilizer Policy 2001, market forces would determine fertilizer prices on the understanding that manufacturer would allow market forces to prevail and will pass the benefit in form of lower price of fertilizer to the farmers.
National Fertilizer Development Center (NFDC) only provides technical assistance to all the relevant stakeholders. The issue of fertilizer price reduction/fixation falls under the purview of Ministry of Industries and Production, the document added.
Copyright Business Recorder, 2019