According to manufacturers, the price of urea was Rs1,790 per bag in June 2016. In the 2016-17 budget, the government, with support from local fertiliser industry, reduced urea price by Rs390 and capped it at Rs1,400 per bag. The downward adjustment in price was made through reduction in General Sales Tax by Rs184, Rs156 subsidy, and voluntary contribution of Rs50 by the industry.
However, in 2017-18 budget, the government reduced its subsidy contribution from Rs156 to Rs100 per bag, forcing the local industry to bear the additional burden of Rs56 per bag. In total, the industry’s contribution stood at Rs106 per bag.
The subsidy was totally withdrawn in 2018-19 budget and the GST was adjusted from 5 per cent to 2pc, which translated into net negative impact of Rs61 per bag on urea pricing.
Industry sources said the government also increased the gas prices with effect from September 2018, which raised cost of production by Rs129 per bag and the total ‘negative’ impact of subsidy withdrawal, downward adjustment of GST, increase in gas price and industry contribution added up to Rs296 per bag.
They claim that the cost of production also went up as the industry was made to install compressors worth billions of rupees to maintain gas pressure, depleting at well heads.
