KARACHI: After announcement of major cut in sales tax and Rs36 billion subsidies on urea, fertiliser prices are being reduced by around Rs390 per bag.
Engro Fertilisers CEO Ruhail Mohammed, in a statement, said that of the total price cut, Rs50 is borne by the manufacturers, whereas the remaining will come from a reduction in GST (General Sales Tax) and subsidies from the government, Ruhail said.
The government has proposed Rs36 billion subsidies on urea, cuts in sales tax to five per cent from the current 17pc and a cap in gas tariff in the budget for the fiscal year 2016-17. The move is likely to result in fertiliser prices plunging from the current Rs1,800 per bag to Rs1,410 per bag by the start of the next fiscal year.
The government in the Finance Bill for the next fiscal year proposed that urea fertiliser price be brought down to Rs1,400 per bag from Rs1,800 per bag, and DAP from Rs2,800 to Rs2,500 per bag to help ease financial pressure on farmers wrought by persistently low agriculture growth.
Ruhail said that manufactures want removal of GST on natural gas as without the move the fertiliser manufacturers will be in a constant GST-refund situation. Fertiliser companies have already taken a hit on margins by absorbing gas price increases in September last year, and a fall in prices would further reduce manufacturers’ margins by at least Rs50 per bag.
