Govt yet to clear pending subsidy claims of fertiliser makers

LAHORE: Government has not settled the subsidy claims of fertiliser makers as yet despite the promise made by the outgoing secretary of food ministry, an industry official said on Friday. 

“A more supportive strategy will help in the reimbursement of nearly Rs20 billion that have been continuously stuck in subsidy payments due to complexities of processes,” a spokesman of Fertiliser Manufacturers of Pakistan Advisory Council (FMPAC) said in a statement. 

It was decided in a meeting on July 24 chaired by the Prime Minister’s Secretary Fawad Hassan Fawad that 80 percent of the pending subsidy claims will immediately be released and remaining 20 percent be paid within three months. The finance division has already released the requisite amount. “So now, there are no major hurdles in releasing these payments,” the spokesman said. 

FMPAC’s spokesman said an ‘unnecessary restrictive’ clause, however, is still applied to the scheme in which the government asks for national tax number (NTN) of every fertiliser dealer. 

“This clause makes this scheme non-viable as it ignores the fact that a big majority (over 90 percent) of the smaller dealers are operating in far-flung areas and do not have NTNs.” 

Moreover, the official added that the subsidy claims are based on general sales tax, which has no relationship with NTN. Such a step may ultimately hamper the distribution of urea, denying the subsidy benefits to the farmers. 

The industry official urged the authorities to timely start the external audit process, which is required to resolve the subsidy crisis. “So, the food ministry must also expedite the issuance of the terms of reference about this external audit of the fertiliser industry.” The official said the fertiliser manufacturers are generously absorbing Rs106 per bag in contrast with the government’s promised subsidy of Rs100. 

Pakistan is self-sufficient in fertiliser production with annual capacity of six million tonnes little over total demand. The subsidy scheme announced in the last budget ended on June 30. Yet, the government, in budget for the 2017/18 fiscal year, announced a reduction in sales tax to Rs100 from Rs400 per bag of diammonium phosphate, which will have a subsidy impact of Rs.13.8 billion. Besides, it announced urea subsidy of Rs11.6 billion.

Fertiliser industry, however, welcomed the appointment of new secretary in ministry of national food security and research.  It hopes that the new secretary will make concrete efforts to solve the matter on priority basis and the government will adopt a more supportive strategy to practically address the woes of this strategic industry, which is playing a key role in agricultural growth.

“The new secretary is urged to find an amicable and early solution of the subsidy crisis,” the spokesman said. “The ministry of finance, FBR (Federal Board of Revenue), State Bank and the food ministry are expected to accelerate efforts to reduce the financial pressure and simplify the procedural complexities in the subsidy scheme, thereby ensuring the passage of benefit to the farmers.”