The Fertilizer Manufacturers of Pakistan Advisory Council (FMPAC) has urged the government to review the enforcement of the Track & Trace (T&T) system to avoid disruption in the fertilizer supply chain.
In a letter to Finance Minister Ishaq Dar, the FMPAC requested the government review the enforcement of the non-compatible track & trace system installed at the fertilizer manufacturing facilities.
The T&T System installed on fertilizer plants is suffering from serious operational issues. The industry is of the view that the system appears to have been imported without a technical feasibility study in relation to the environment in Pakistan. Moreover, no reliable evidence of global performance has been found in the fertilizer industry.
The fertilizer industry was forced to make a huge investment in the installation of the system despite apprehensions expressed in various meetings.
The performance of the system has been dismal in an open environment, and the consortium that provided the equipment has been unable to address the issues. Hence, the fertilizer industry has demanded a replacement of the system or a refund of the amount invested. Moreover, the industry is of the view that enforcement of the system in its present form will lead to a serious disruption in the supply of fertilizer.
According to the letter, in compliance with S.R.O. 250(I)/2019 dated February 26, 2019, and Sales Tax General Order No. 3 of 2021 dated March 11, 2021, issued by the Federal Board of Revenue (FBR), the Track & Trace System deployment project was initiated for the fertilizer industry in February 2022.
Tri-partite agreements between the manufacturers, FBR, and FBR licensee (M/s AJCL/MITAX/Authentix Consortium) were signed on April 14, 2022, and the TTS was made operational across the entire fertilizer industry from a given deadline of July 1, 2022. However, the fertilizer industry has raised serious concerns about the suitability of the system for fertilizer production facilities after confronting multiple technical issues during and after the implementation of the T&T system project.
The letter states that the incompatibility of the system with the harsh and humid outdoor environment of the fertilizer industry renders it ineffective and unfit for continuous use. The stamp detection efficiency is far less [as low as 50 percent] than the guaranteed value of more than 99 percent. Stamp reconciliation also generates errors with actual production reporting, etc. Despite the best efforts of the FBR licensee, FBR, and the industry, these technical issues remain unresolved.
Executive Director FMPAC, Brig (R) Sher Shah Malik, said that the fertilizer industry is one of the most compliant sectors of Pakistan and has always supported the government’s efforts on documentation of the economy.
He further claimed that the T&T system is neither considered suitable for the fertilizer industry nor is it serving any of its stated objectives of enhancing tax revenue, reducing counterfeiting, or preventing the smuggling of illicit goods. He explained that fertilizer is exempt from general sales tax (GST), and the fertilizer sector as a whole is a compliant and transparent sector that pays all its taxes with no understatement of its sales or production, thereby ensuring that the T&T system has no impact on revenue collection.
He claimed that there is no evidence of counterfeiting urea and other fertilizers. The domestic prices of urea have always been substantially lower than those on the international market, so there is no possibility of smuggling illicit goods into the country. It is also worth noting the complete system, including spares and tax stamps, is imported and is an undue recurring cost under the prevalent foreign exchange reserve situation.
The fertilizer industry cautioned the government that the enforced obligation of the T&T system, with its unreliable operational efficiency, can disrupt the fertilizer supply chain, leading to serious consequences for the agriculture sector.
