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Thursday July 18, 2024

Fertiliser makers seek refund or free solution as TTS falters

By Jawwad Rizvi
May 23, 2024
A farmer disperses fertiliser in a rice paddy field on the outskirts of Lahore. — AFP/File
A farmer disperses fertiliser in a rice paddy field on the outskirts of Lahore. — AFP/File

LAHORE: Fertilizer industry has called on the government to scrap the Track and Trace System (TTS), which it says has failed to achieve its intended goals due to technical issues and high costs.

In a letter to Finance Minister Muhammad Aurangzeb, the industry requested that the government direct the TTS provider to refund all expenses incurred by the manufacturers for the deployment of the TTS as a warranty claim, or provide a service-compatible TTS solution free of cost to them.The industry has spent Rs350 million on the deployment and purchase of TTS stamps.

The industry claimed that the TTS is neither suitable for the industry nor fulfills any of its stated objectives, such as enhancing tax revenue, reducing counterfeiting, and preventing the smuggling of illicit goods.

"All domestic fertilizer manufacturers have complied with the statutory requirement and significantly invested in TTS implementation. However, multiple technical issues observed during and after the TTS project's implementation raise serious concerns about the system's suitability for fertilizer production facilities, obstructing the achievement of 99 percent compliance as per the Tripartite Agreements," the letter said.

"The system's incompatibility 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 below the guaranteed value of over 99 percent, often falling as low as 50 percent, and errors in stamp reconciliation with actual production reporting persist. Despite the best efforts of the FBR licensee, FBR, and industry, these technical issues remain unresolved."

The fertilizer industry, in compliance with S.R.O. 250(1)/2019 dated February 26, 2019, and Sales Tax General Order No. 3 of 2021 dated March 1, 2021, issued by the Federal Board of Revenue (FBR), initiated the TTS deployment project for the fertilizer industry in February 2022. Tripartite agreements between the manufacturers, FBR, and the FBR licensee (M/s AJCL/MITAX/Authentix Consortium) were signed on April 14, 2022, and the TTS was operational across the entire fertilizer industry by the deadline of July 1, 2022.

An industry official, in the letter to the finance minister justifying the exemption of the fertilizer industry from the TTS, stated that since fertilizer is exempt from GST, there is no impact on revenue collection.

"The fertilizer sector is compliant and transparent as a whole, paying all taxes without understating its sales and production. Moreover, fertilizer manufacturers already regularly provide details of fertilizer production and distribution to dealers to the Ministry of Industries and Production (MOIP).

There is no evidence of counterfeiting urea and other fertilizers; manufacturers are already taking various measures to protect their brands. Additionally, the domestic prices of urea have always been substantially lower than the international market, negating the possibility of smuggling illicit goods into the country."Furthermore, the complete system, including spares and tax stamps (i.e., UIM reels), is imported, adding an undue recurring cost amidst the current foreign exchange reserves situation.

Moreover, the unreliable operational efficiency of the enforced TTS obligation can disrupt the fertilizer supply chain, leading to serious consequences for the agriculture sector and increasing the import bill.

The fertilizer industry has requested that the government objectively revisit the requirement of the Track and Trace System for the domestic fertilizer industry to avoid any disruption to the fertilizer supply chain.

The industry also mentioned that after the successful deployment of digital invoicing systems, which effectively meet the objective of production monitoring in a more detailed manner, the faulty TTS can be easily discontinued. —