Fauji Fertilizer Company Limited (PSX: FFC) and Fauji Fertilizer Bin Qasim Limited (PSX: FFBL) have increased urea prices as a hedge against the 5% federal excise duty (FED) on the fertilizer sector imposed by the government in the Budget 2023-24.
FFC has increased urea prices by Rs. 350 per bag effective from 1st July-2023, with retail prices now standing at Rs. 2,910 per bag. Meanwhile, FFBL has hiked its urea rate by Rs. 162 per bag to pass on the impact of FED, taking prices up to Rs. 3,212 per bag.
The Deputy Head of Research at JS Global, Waqas Ghani, told ProPakistani, “This price increase exceeds the necessary adjustment to account for the impact of Federal Excise Duty (FED) and is likely intended to cover the increase in gas prices announced earlier, although not explicitly for fertilizer companies on the Mari network”.
FFC has also increased DAP prices by Rs. 480 per bag to pass on the impact of the recently imposed tax on imported DAP. FFC DAP prices now stand at Rs. 9,995 per bag, whereas FFBL DAP stands at Rs. 10,045 per bag.
A similar announcement by Engro Fertilizers Limited (PSX: EFERT) is also expected.
This surge in fertilizer costs could kill demand and hurt yields due to unaffordability. Fertilizer costs have more than doubled since January 2021, and the pricing trend is anticipated to go further up as mentioned above.
The price hike combined with an across-the-board withdrawal of domestic subsidies may give rise to smuggling and pivot more power to mafias running the urea market from down under.
