Engro, in its letter to the Advisor appreciated reduction of GIDC on the fertilizer sector which has enabled significant reduction in urea prices and resultant improvement in crop yields. Engro Fertilizers welcomed the decision as according to the company's claim it was the first company to have passed on the full impact of the reduction in GIDC to the farmers. The proportionate reduction in urea prices by respective companies, given their varying gas mixes, has created confusion in the market.
The company was of the view that in the current scenario, a large portion of desired benefit of the GIDC reduction is not flowing through farmers.
Engro conveyed to the Advisor that it was ready to reduce its price immediately by Rs 400 per bag, if the government facilitates with the following decisions to create a level playing field: (i) Engro fertilizers, despite being a fertilizer manufacturer, receives some of its gases for base plant on Petroleum Policy Pricing 2012. Alignment of pricing of this allocated gas for base plant to Fertilizer Policy 2001 would remove the competitive cost disadvantage that the company currently faces. The alignment would cost the government around Rs 2.5 billion post tax; and (ii) base plant of the company has the capacity to produce in excess of 200,000 tons of urea, utilizing the non-pipeline quality indigenous gas, at the best energy index in the industry of around 22 MMBTU/ ton.