After government’s decision to withdraw subsidy of Rs 340 per bag on urea fertiliser from January 9, the price of the commodity has increased by Rs 200 per bag from Rs 1400 to Rs 1600 per 50 kg bag in the market, official sources said.
They said the price would increase further in coming days, as during the current period the consumption of urea is low. However, they said that the increase in urea prices has sent a wrong signal to the farmers as they have used more fertiliser to sow wheat crop but failure to increase the support price for wheat coupled with the withdrawal of subsidy on urea will lead to a less use of fertilisers in the coming weeks.
They said less use of urea may decrease the wheat production for which a production target of 26 million tonnes is set. Pakistan is estimated to have a surplus of three million tonnes of wheat at the start of harvesting season in April this year. The urea subsidy was approved after the government was provided with evidence that higher urea prices have lead to a less use of fertilisers and decline in productivity.
The source said that earlier the government had set a urea subsidy of Rs 42 billion for the current financial year. Out of which Rs 27 billion was cash subsidy, which was to be passed on to the fertiliser companies. The government was giving Rs 350 in subsidy while urea manufacturers were providing Rs 50 per bag that helped lower the urea price from Rs 1790 per bag to Rs 1400 per bag, but the government has only released Rs 7 billion to the urea manufacturers while rest of the claims were withheld.
The Punjab government, the source said, had asked the federal government to reconsider its decision as farmers were faced with difficulties in getting good prices for their produce. However, they added that the tax authorities were pressing for removal of subsidy on urea as the FBR was faced with a shortfall of Rs 120 billion during the first six months of the current fiscal year. The tax authorities are of the opinion that the recovery of full GST on urea and other fertilisers will help in improving revenue collection.
Meanwhile, Senate Standing Committee on Finance and Revenue has taken a serious notice of the withdrawal of fertiliser subsidy and summoned a meeting on this issue. Senate Standing Committee on Finance and Revenue’s chairman has condemned the government decision and labelled it as a disaster for the agriculture sector.
Mandviwalla said that absence of subsidy for fertiliser will directly hurt the capacity of farmers to use minimum requirement of fertiliser for key crops, fruits, vegetable, and orchards.
The decision will directly affect productivity and further suppress agri sector growth rate and create a shortage of the product and to plug shortage we will import expensive agri products which will mean end consumer will pay more for agri products.
Mandviwalla said the PPP government enhanced support price of wheat during its tenure from Rs 625 to 950 per 40 kg and the country attained the status of wheat exporting country from the wheat importing country that same year.
