Fertiliser sector unhappy with FBR’s track, trace system

LAHORE: Fertiliser manufactures on Wednesday said the Federal Board of Revenue (FBR) track and trace system (TTS) in its present form would lead to a serious disruption in the supply of fertilisers.

Fertilizer Manufacturers of Pakistan Advisory Council (FMPAC) in a letter written to Finance Minister Ishaq Dar questioned the suitability of the system for fertiliser production facilities as manufacturers confronted multiple technical issues during, and post implementation of the TTS project.

The TTS was deployed by the fertiliser industry in compliance with FBR SRO 250(I)/2019 dated February 26, 2019 and Sales Tax General Order No 3 of 2021 dated March 11, 2021 in February 2022. The 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 fertiliser industry from a given deadline of July 1, 2022.

However, the industry claimed that the TTS installed on fertiliser plants was suffering from serious operational issues. The industry was of the view that the system was implemented without technical feasibility study in relation to the obtaining environment in Pakistan. Moreover, no reliable evidence of global performance has been found in the fertiliser industry.

Industry was forced to make huge investments for the installation of the TTS, the letter alleged.

“The performance of the system has been dismal in the open environment, and the consortium that provided equipment has been unable to attend the issues. The fertiliser industry demands replacement of the system or a refund of the amount so invested,” FMPAC said, requesting the government to review the enforcement of non-compatible TTS installed on the fertiliser manufacturing facilities.

The letter states that “the incompatibility of the system with the harsh and humid outdoor environment of the fertiliser industry renders it ineffective and unfit for continuous use. The stamp detection efficiency is far less (as low as 50 percent) than guaranteed value of more than 99 percent. Stamps reconciliation also generates error with actual production reporting, etc. Despite the best efforts of the FBR licensee, FBR and industry, these technical issues remain unresolved.”

FMPAC Executive Director Sher Shah Malik said fertiliser industry was one of the most compliant sectors of Pakistan, and has always supported the government's efforts on documentation of the economy.

“The TTS is neither considered suitable for the fertiliser industry nor is serving any of its stated objectives of enhancing tax revenue, reducing counterfeiting, and preventing smuggling of illicit goods,” he added.

Since fertilisers are exempted from GST, and the sector as a whole was compliant and transparent, while paying all its taxes with no understatement of sales and production, the TTS has no impact on revenue collection, he added.

Malik claimed that there was no evidence of counterfeiting urea and other fertilisers.

“Domestic prices of urea have always been substantially lower than the international market, hence there is no possibility of smuggling of illicit goods into the country.”

It should be noted that the complete system, including spares and tax stamps were imported and were an undue recurring cost under the prevalent foreign exchange reserves situation.

Fertiliser industry cautioned the government that the enforced obligation of the TTS with its unreliable operational efficiency could disrupt the fertiliser supply chain, leading to serious consequences for the agriculture sector.

Sugar and tobacco are two other sectors where TTS was installed. Both the sectors appreciated the system and believed that it helped in not only documenting the sector, but also in increasing the government’s tax collection.