The Fertilizer Manufacturers of the Pakistan Advisory Council (FMPAC) have dismissed the Sindh Chamber of Agriculture’s claim that the manufacturers have increased urea prices to pass the burden of super tax on to the farmers.
The latter alleged on Wednesday that fertilizer manufacturers have increased the urea rates to Rs. 2,350 a bag from Rs. 1,950 as the federal government had imposed a super tax on the industry. It called the price hikes ‘illegal’ and demanded that the government take immediate action to reduce the rates.
FMPAC Executive Director Brig Sher Shah clarified that “the recent price increase has been mainly on account of amendment in the Sales Tax regime. Additionally, like many other industries, the rising cost of doing business, inflation, rupee devaluation, and a considerable increase in finance cost have forced the manufacturers to increase prices”.
He also mentioned that “the impact is far more and has only been partially passed on”.
The fertilizer sector has been exempted from the application of GST in the approved budget, due to which input GST has become part of the cost for manufacturers. The government has also not made a strong commitment to clear the GST refunds and the subsidy receivables of the fertilizer industry.
On 30 May, urea prices fell from Rs. 2,033 per 50 kg bag to Rs. 1,850 based on the understanding from the government to the industry that the upcoming budget will resolve three outstanding issues — the payment of the pending subsidy and sales tax receivables, a resolution of the mismatched sales tax, and the standardization of gas pricing across the industry.
While previous issues remained unresolved in the budget, a 10 percent super tax was imposed on the fertilizer industry on last year’s profits, and another four percent super tax has been imposed on the profits of the sector.
Shah explained that “in a business environment with increasing operating costs and rising interest rates, the fertilizer manufacturers have been fully cooperating with the government to ensure consistent and affordable supplies of fertilizers to the farmers. In the national interest, the industry had agreed to take a hit on their earnings and reduced the urea prices to Rs. 1850 per bag, only on the assurance that the government would soon resolve all pending matters”.
“Unfortunately, the issues have remained unresolved in the budget and the sector continues to suffer due to the accumulation of GST refunds, subsidy receivables, amendments in the GST regime, and imposition of new taxes. Even then, urea continues to be sold at a discount of over 70 percent against global levels,” he added.