ISLAMABAD   -   The Fertilizer Companies are likely to increase the Urea price by Rs200 per bag, after the government decision to withdraw Gas Infrastructure Development Cess (GIDC) ordinance. The decision to increase the price by Rs200 will take the per bag price of Urea from the existing Rs1840 to Rs2040 per bag. The impact of gas price increase has not been passed on since July 2019 in anticipation of a GIDC settlement but now in the changing scenario it has decided to pass on the burden of Rs200 per bag to the consumers, source told The Nation.

The price of Urea was Rs1580 per bag before GIDC was imposed initially in January 2012. Thereafter, the twice increased gas price led to an impact of Rs168 and another Rs210 on 1 July 2019, which would sum up to price of Rs1958 per bag. If GIDC impact of Rs405 per bag was fully passed on, Urea should have been selling today at Rs2363 per bag, the impact of change in sales tax and inflation notwithstanding. The mere fact that Urea is presently selling at Rs1840 per bag is reflective of inability of the fertilizer industry to pass through the full impact of GIDC. The government has provided subsidy of Rs132 billion to the fertilizers on the supply of gas during past nine year, claimed the Fertilizer industry.

Urea was delivered to farmers at around Rs1800 per bag vs. international prices of around Rs2800 per bag, claimed by the spokesman. Over the past 9 years the fertilizer industry has received Rs132 billion in gas subsidy but it has delivered four times the benefit i.e. Rs527 billion in direct benefit to farmers by selling urea, on average 20-25percent lower than international market prices.

After the imposition of GIDC in January 2012, fertilizer sector was levied GIDC at much higher rates (Rs300 per MMBTU), triple that of power sector (Rs100 per MMBTU) and double the rest of industrial sector (Rs150 per MMBTU). Fertilizer paid an amount of Rs129 Billion as GIDC to the exchequer, said the spokesman. The GIDC legislations were challenged in different courts of law on various occasions and grounds, especially for being unconstitutional, unreasonable and discriminatory.  The gas prices were significantly increased on 1 July 2019, that led to rise in cost of urea by Rs210 per bag. Advisor Industries, Razzaq Dawood persuaded the manufacturers to absorb the adverse impact of increase in gas price in anticipation of GIDC settlement. However, the recently promulgated GIDC (Amendment) Ordinance 2019 was much to the dismay of fertilizer industry, being highly unfair and discriminatory to fertilizer industry that had paid more in the past compared to other industries, said the spokesman.