Govt extends fertiliser subsidy, allows export of 300,000 tons

ISLAMABAD: The government on Monday extended cash subsidy on domestic sales of fertiliser and also allowed 300,000 tones of its exports in a bid to reduce surplus inventory in the country.

However, the Economic Coordination Committee (ECC), in a meeting, allowed traders to finalise their export deals by 28th of April without any subsidy.

 “In pursuance of the Prime Minister’s decision, the ECC endorsed continuation of the previous fertiliser subsidy scheme for FY2016/17 on the same terms, conditions and modalities,” a statement said. “The government is paying Rs200 per bag subsidy to support the farming community and agriculture sector; however, this subsidy will not be available on exports of fertiliser.” 

The meeting observed that the export permission was given in view of around one million metric tons of surplus urea fertiliser available in the country. 

Topline Securities Limited, in a report, expected that ‘no subsidy’ would not discourage exporters. “Producers will opt to export where it is expected to be break-even for them at the current prevailing US-Gulf urea prices of $255/ton.” 

The ECC meeting, chaired by the finance minister Ishaq Dar, also approved the resumption of subsidy on fertiliser for the current fiscal year of 2016/17 in the wake of its growing demand for the winter crops, triggered by rainfalls across the country.

In August last year, the federal government announced Rs28 billion funds to subsidise the fertiliser purchase. The subsidy resulted in Rs390 reduction in price of 50-kilogramme urea bag to Rs1,400 and Rs300 cut in diammonium phosphate (DAP) rate to Rs2,558.

In 2016, offtake of urea stood at 110 million bags, while that of DAP was 2.2 million tons, according to various estimates.   

Within five months of the announcement, the government withdrew the subsidy on the ground that the fund had been exhausted, causing a hue and cry from farmers.  

Prime Minister Nawaz Sharif, early this year, ordered the finance ministry to continue subsidising fertilisers. 

“Agriculture is backbone of the national economy and farmers play a pivotal role in strengthening the economy of the country,” minister Sharif said in a statement. “Farmers will be provided all the basic facilities for improvement in GDP of the country.”

The State Bank of Pakistan will monitor the export quantity through the mechanism adopted for the sugar exports, according to ECC’s decision. The Fertilizer Review Committee (FRC) will monitor domestic prices of urea on monthly basis and in case of abnormal increase in retail price as per weekly sensitive price index the FRC will recommend the ECC to discontinue exports.

The ECC meeting also approved, in principle, the payment of outstanding claim of Pakistan Agricultural Storage and Services Corporation Ltd (Passco) on account of supply of wheat in 2008/09. It directed the ministry of national food security and research and Passco to reconcile the outstanding amount with the ministry of finance.