Fertiliser makers fret over unsettled subsidy claims

KARACHI: Fertiliser makers on Tuesday lamented over a delay in settlement of their outstanding subsidy claims by government “much to the frustration of industry.”  

“One whole month has passed since the ministry of national food security and research was directed by the prime minister’s office to release all the pending amounts urgently, but still nothing has been done to reduce the financial burden,” Fertilizer Manufacturers of Pakistan Advisory Council (FMPAC) said in a statement.  

“Finance division has already released the requisite amount, thus holding of payments does not make much sense,” it added.  FMPAC said the government owes more than Rs20 billion in subsidy claims to fertiliser manufacturers that “are absorbing Rs106 per bag to keep the prices low and the government has promised to pay Rs100 per bag as subsidy.” In July, the government ordered immediate release of 80 percent of outstanding subsidy claims and the rest within three months after third party validation. 

The council said payments are still pending on “lame excuse of non-availability of funds.” Government gives financial assistance to fertiliser manufacturers to reduce prices, which remain capped in the country due to subsidy programme.

The country is self-sufficient in fertiliser production with an annual capacity of six million tonnes little over total demand.   Subsidy program brought urea fertiliser price down to Rs1,400/bag during the last fiscal year from Rs1,800/bag, while diammonium phosphate price came down to Rs2,500/bag from Rs4,200/bag. Agriculture sector posted growth of 3.46 percent during the last fiscal year of 2016/17.

Government, in budget 2017/18, extended the financial assistance scheme by announcing sales tax reduction on urea sales. But, it linked tax concession to national tax number (NTN) of fertiliser dealer. 

“The condition makes the scheme non-viable as it ignores a fact that a big majority (over 90 percent) of the smaller dealers are not registered with the taxation authorities and do not have NTNs,” Fertilizer Manufacturers of Pakistan Advisory Council said.

“Such a step may ultimately hamper the distribution of urea denying the subsidy benefits to the farmers.” The council said food ministry has still not issued terms of reference about external audit of fertiliser industry.

“We have not disrupted supply of subsidised fertilisers to farmers, despite major cash flow problems we are facing,” it added. “Concerned officials must take personal interest in this matter to ensure that benefit of subsidy continues to reach farmers, and supply of urea in market remains uninterrupted.” 

Unsettled subsidy claims already took a toll on fertiliser sales as the agriculture key input’s off-take plunged 48 percent month-on-month to 746,000 tonnes in July. Urea sales slumped 68 percent month-on-month and 56 percent year-on-year to 339,000 tonnes during the last month.