Govt yet to settle Rs20bln fertiliser subsidy claims

KARACHI: Government is yet to settle subsidy claims worth more than Rs20 billion of the fertiliser makers, compelling them to refuse participation in a subsidy programme, a statement said on Monday. 

Fertiliser industry resumed sales of a key agriculture input early this month after an assurance from the finance ministry that a subsidy notification will be issued very soon.  “Unfortunately, till date, this notification has not been issued due to some unknown reasons or procedural delays,” said the statement.

Government promises financial assistance for fertilizer manufacturers to reduce prices of the commodity. Fertiliser prices remain capped in the country due to subsidy programme. The country is self-sufficient in fertiliser production with an annual capacity of six million tons – little over total demand.  

The government, in budget 2017/18, announced a reduction in sales tax to Rs100 from Rs400 per bag of diammonium phosphate, which will have a subsidy impact of Rs13.8 billion. Besides, through reduction in tax rates and subsidy a urea bag price will be maintained up to Rs1,400/bag during the current fiscal year, which will have a subsidy impact of Rs11.6 billion.

The industry is already passing subsidy impact on to farmers. Earlier the government was clearing subsidy claims based on general sales tax (GST) returns submitted by the companies. In 2005 and 2008, the payments were released on the basis of audited financial statements of the companies.

Now, ministry of food also wants verification of sales by the provinces in order to settle the claims.  “While the capacity of provinces was highly questionable, Khyber Pakhtunkhwa and Sindh governments did not display the will to support initiative of the federal government,” the statement said. “This led to highly sluggish processing of claims by food security ministry, which itself was not equipped with wherewithal to handle the subsidy disbursement in this complex manner.”

It added that fertiliser makers had also submitted indemnity bonds.  The industry advised the concerned authorities to urgently resolve the matter by relying primarily on GST returns to simplify and expedite the process of claims verification. 

“The provincial governments also need to be sympathetic to their farming community and must realise that there cannot be two prices of fertilisers, hence they have to cooperate with the federal government for the subsidy disbursement mechanism,” it said. “If the government continues to delay the promised notification, the country may face a bigger agricultural crisis. The ministries must act fast for a timely resolution of this matter to help the farmers get good crop yields and enrich the national economy.”

The industry said both ministries of food and finance seem to disown the subsidy scheme.  “This apathy shown by the government may, once again, force the industry to stop the sale of urea to put some pressure on the government,” it added. “The crisis may even force the companies to refuse further participation in this important subsidy-programme.”