Fertiliser makers demand release of Rs20bln in subsidy claims

LAHORE: Fertiliser manufacturers on Thursday demanded of the government to fulfill their subsidy claims that exceeded Rs20 billion, creating cash flow challenges for the industry.

Fertiliser makers made subsidy payments of Rs20.67 billions in the subsidy schemes between 2016 and 2018 and the amount has yet to be cleared, Fertilizer Manufacturers of Pakistan Advisory Council (FMPAC) said in letters to the Prime Minister and advisers on finance and commerce.

On budget, the FMPAC said maintaining of general sales tax on fertiliser at two percent would encourage the balanced use of fertilisers by the farmers and reduce cost of production. The government was asked to include their proposals in the finance bill that needs approval from the parliament.

The council urged the government to remove certain anomalies from the budget to avoid piling up of refunds, which already stand at around Rs24 billion.

The industry’s representative body said input general sales tax on urea is Rs109 per bag against the output general sales tax of Rs35 per bag. “A huge mismatch leads to refundable amount of Rs8 to 9 billion per annum – Rs75 per bag,” it said in the letter. The council further said diammonium phosphate bears input general sales tax of Rs209 per bag against output general sales tax of Rs62, which results in even higher refund of Rs148 per bag. “Similar types of mismatches in input and output general sales tax are being faced in case of other fertiliser products as well.”

The council said a proposal to implement non-refundable three percent minimum value addition tax on imports in addition to input general sales would worsen the input-output adjustment situation for imported fertilisers.

“In order to avoid further piling up of general sales tax refunds and resultant additional cost of financing for the industry and end consumers, general sales tax on natural gas and re-gasified and liquefied natural gas currently taxed at five percent for feed and 17 percent for fuel should be reduced to zero percent,” the FMPAC said. “Similarly, the general sales tax on phosphoric acid and rock phosphate for fertiliser manufacturing, presently taxed at five percent, should be reduced to zero percent.”

The council further asked general sales tax on power and steam used for fertiliser manufacturing specifically by Fauji Fertilizer Bin Qasim should be reduced to zero percent. Additional value-added tax on imports of fertiliser should be abolished to maintain affordability of fertilisers. The current general sales tax refunds might be processed expeditiously through some fast- track facility.

Being one of the leading contributors to the exchequer, the fertiliser manufactures sought support of the government to save huge foreign exchange reserves through import substitution and providing cheaper fertilisers to the farmers in comparison with the international market.