Following the budgetary measures to enhance tax collection the urea price is likely to jump by Rs50-75 to Rs 1720-1745 per bag from the start of next fiscal year on July 1, 2013, as the price increase in relationship to GST on retail price coupled with increase in its rate will be passed on to the end consumer by the manufacturers.

Though tax increase will affect the cost maximum by Rs 7-10 but the mafia is inclined to loot the growers by raising the rate in the range of Rs 50-75 per bag on the plea of jump in levies. Industry sources said that GST has been imposed at retail fertilizer price level instead of ex-factory price level while, in line with other sectors, its rate has also been increased by 1%. They said that subsidy of Rs30 billion has been allocated for fertilizer import as against revised estimate of Rs10 billion in FY13.

They said that 0.1% advance tax on distributors, dealers and wholesalers to be collected by the companies.

Although Rs30 billion subsidy is allocated in the budget, actual disbursement could be on the lower side given expected urea shortfall of 0.8-1 millions in FY14.

Furthermore, the distributors, wholesalers and dealers will also pass on the impact of additional advance tax collection to the end consumers as well.

Industry sources said that Engro Corporation had offered to reduce urea prices by Rs300 per bag if government fulfills its contractual obligations to Engro.

In 2010 the price of urea was Rs 800 per bag which is now Rs 1,670 (inclusive of GST). Engro’s offer to reduce price by Rs 300 will bring down the price of a urea bag to 1370 (inclusive of GST).

In 2012, Engro Fertilizer’s plant received 9% of its gas allocation in violation of its water tight gas contract with SNGPL. As a company across all sectors it has received the least amount of gas in the year, they claimed.

They maintained that since 2010, the government has supplied gas to other sectors, many of whom do not even have gas supply agreements. Furthermore, they have provided gas to other sectors in complete violation of the government’s own Gas Allocation Policy. As a last resort in 2011, Engro went to the Sindh High Court who passed judgment that gas should be given to Engro per its contractual commitment and Article 158 of the constitution. The government did not act on the Sindh High Court order.