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Fertiliser makers resume sales on Rs20bln subsidy prospects

Fertiliser manufacturers on Tuesday decided to resume urea sales as the government assured them of clearing subsidy backlog and notifying incentives worth more than Rs20 billion announced in the budget for the current fiscal year within a week.

Ministries of finance and food security and research assured fertiliser makers that subsidy notification would be issued within next 10 days, a statement said. It said the industry decided to stop urea sales after both the ministries dragged feet on issuing the notification.

The industry officials hope that the government will fulfill its commitment and devise a simplified way of subsidy disbursement.

Government gives financial assistance to fertiliser manufacturers to reduce prices of the key agriculture input. Fertiliser prices remain capped in the country due to subsidy programme, which is a costly exercise for the government and the fertiliser industry.

The country is self-sufficient in fertiliser production with annual capacity of six million tons little over total demand.  The subsidy scheme announced in the last budget ended on June 30, which was feared to cause a lapse of unsettled claims of the last year.

The government, in budget 2017/18, announced a reduction in sales tax to Rs100 from Rs400 per bag of diammonium phosphate (DAP), which will have a subsidy impact of Rs.13.8 billion. Besides, through reduction in tax rates and subsidy a urea bag price will be maintained up to Rs1,400/bag during the current fiscal year, which will have a subsidy impact of Rs11.6 billion.

Industry officials said there is still a backlog of Rs20 billion subsidy claims. Financial burden of delayed payments has already caused serious concerns for the fertiliser industry, they added.

“Under these circumstances, the manufacturer companies had been reluctant to participate in the subsidy scheme, which is channeled to reach to the farmers through the producers,” said the statement.

Last year, subsidy program brought urea fertiliser price down to Rs1,400/bag from Rs1,800/bag earlier, while DAP price to Rs2,500/bag from Rs4,200/bag.

The outcomes of these measures are evident in increase in offtake of fertilisers and production of major crops. Agriculture sector posted growth of 3.46 percent during the last fiscal year of 2016/17.

Reporter. Fertiliser makers resume sales on Rs20bln subsidy prospects. The News, July 5, 2017.

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