LAHORE: The urea companies have announced to decrease prices of fertilizer bag of 50kg by Rs105 after the government has committed to give them subsidy in gas tariffs.
Fatima group has already decreased its fertilizer bag prices by Rs146 to Rs1,823/bag to encourage dealers to clear stocks immediately. However, no other manufacturer has yet reduced fertilizer prices yet.
As per understanding, the government would be willing to take back feedstock price increase i.e. Rs77/mmbtu, translating into Rs105 per bag reduction in urea bag prices. Though the move seems neutral to all players, it would hit margins of FFC and FFBL in 4QCY15 as they have to sell their costly inventories at lower prices, while Fatima and Engro Fertilizers (EnVen) would bear the maximum brunt as their subsidized gas price would not reduce but have to lower the bag price.
