KARACHI: Fertiliser manufacturers reached an understanding with the government that they would increase urea prices only by Rs15 instead of previously announced Rs160/bag, a top ministry official said on Saturday.
But, market sources said the talks on a cut in tariffs of gas, feedstock for fertilizer makers, are still underway and any decision to cut the price will only be made after a successful negotiation between the government and fertiliser manufacturers.
“Urea manufacturers are allowed to increase prices by only Rs15/bag,” said Seerat Asghar, secretary federal ministry for national food security and research.
The increase will be on the price as on August 31.
Earlier, fertiliser makers intimated of urea price increase by Rs160/50kg bag at the beginning of September to pass on the surge in gas tariff to farmers.
However, they said if the government revises down its gas tariffs for fertiliser manufacturers they would not go for the raise.
It is not clear whether the government will cut the gas tariff. Asghar, however, said the food ministry devised a procedure, in consultation with the manufacturers, to disburse Rs500/bag subsidy on phosphate fertilizers that is DAP, which is one of the costly fertilisers. “The ministry of finance will notify this and we have sent details for its approval,” he said.
The government increased gas tariff by up to 67 percent for fertiliser manufacturers with effect from September 1.
The manufacturers are sold gas under two different categories at different rates: one for power generation and another for fertiliser manufacturers for whom gas is a basic raw material.
Industry officials refused to comment on what would be the new prices of their products. They said negotiations with the government are yet not over.
“The manufacturers have met the government about a dozen times since the announced surge in prices in September,” an industry official said.
The government, in the budget for the current fiscal year of 2015/16, allocated Rs20 billion to provide cheaper fertilisers to farmers. In middle of September, Prime Minister Nawaz Sharif established the subsidy fund of Rs20 billion, which is believed to bring down the prices of potassium and phosphate fertilisers by Rs500/bag.
Naseem Akhter, a fertilizer dealer at Naushahro Feroze district, said that he had been selling urea at old prices of August at Rs1,900-1,950/bag in retail, as manufacturers did not increase prices. "The government is providing a subsidy of over Rs400/bag,” he claimed. The dealer Akhter sold first batch of subsidised DAP at Rs3,350/bag against Rs3,750/bag earlier.
Meanwhile, majority of the farmers have halted new buying, while waiting for the subsidy.
They need to fertilise farms in November to grow the winter staple crop, wheat.
The government data suggested that the sales of fertilisers declined 38 percent to 463,000 tons in August.