ISLAMABAD: About 70 percent of Pakistan’s population is engaged with the agricultural sector and fertilizer is one of the most essential inputs that play a vital role in development of agriculture in the country.
A recent communique from the ‘Fertilizer Manufacturers of Pakistan Advisory Council’ (FMPAC) stated that due to continuing energy crisis in the country, the government needed to priorities and rationalize the distribution of Gas judiciously and with maximum value addition, said a news release issued here Thursday.
With a consistent gas supply to fertilizer plants, the farmers can get urea at the right time and at economical rates, enabling higher productivity.
While most agrarian countries around the world give subsidy to their agricultural sectors while Pakistan is one of the few countries which has imposed taxes like GST and GIDC on agricultural inputs.
Therefore, giving gas-subsidy to the fertilizer manufacturing industry is worth every penny. It is a highly productive incentive, being given to an essential industry that provides impetus to the whole economy, while the fertilizer sector optimally uses natural gas supplies to add tremendous value by converting raw gas into Urea grains.
Any shortfall in the domestic production of urea brings a sharp decline in the agricultural output of the country, and directly hurts the poor farmers and the economy.
Over the years, Pakistan’s fertilizer-sector has been suffering due to gas shortages in the country, which leads to curtailment of gas supply to the fertilizer sector.
This factor results in idle-capacity and restricts local urea production. Although, the annual local demand for fertilizers is 6 Million Tons, our fertilizer industry has made robust investments to create a cumulative installed-capacity of 6.9 Million Tons.
In the wake of gas curtailment in the fertilizer sector from 2010 onwards, Pakistan was forced to spend 1.5 billion Dollars and pay a subsidy of around Rs. 80 billion on the import of 3.4 million tons of urea from 2010 to 2012.
The Gas-subsidy given to urea plants in Pakistan makes a lot of sense, as the difference between domestic production cost and international urea prices is approximately Rs.1000 per bag.
With the increased exports from China, after relaxation in export tax, international price trend in fertilizer products is likely to become steadier, this may create challenges for the Pakistani fertilizer manufacturers, by making imports more attractive for Pakistan.
Experts of fertilizer sector opined that Pakistan should also formulate an ingenious tax regime to nurture its agriculture sector, while strengthening the supply of its basic inputs.
Experts hoped that economic wisdom will soon prevail in the country and the authorities will take concrete measures to ensure sufficient gas supplies at subsidized rates and the taxation system will be made more transparent and mutually understandable where business should tax as a part of pay back mechanism in the future of that business.
