Pending subsidy payments on the import of DAP

Most individuals are well aware of the current state of the government, given the release of this year’s budget and the conditions set forth by the International Monetary Fund (IMF) that loom over us. Although the budget will likely be released by the time this article is published, there are certain issues that the government has chosen to overlook, specifically the outstanding payments owed to local commercial importer companies.

One such issue pertains to the pending subsidy payment for Imported DAP Fertilizer. To provide context, the federal government had introduced subsidies on fertilisers purchased by farmers in the 2015-16 and 2016-17 budgets, in order to ensure the availability of affordable farming inputs. In 2017-18, the federal government discontinued this subsidy scheme by rationalising and reducing the rates of Sales Tax imposed during fertiliser imports.

Despite more than five years passing, a significant amount of subsidy reimbursement remains outstanding. Both the previous and current governments, along with the relevant ministries, have been unresponsive and have failed to fulfil their commitments outlined in the notifications they had issued.

Numerous local commercial importers are still awaiting their subsidy payments. Based on available information, an approximate amount of Rs 483 million remains unpaid, which the government has thus far ignored.

The subsidy amount per 50kg bag was reduced from Rs 500 in the 2015/16 budget to Rs 300 in the 2016/17 budget. However, the fundamental procedures remained unchanged as specified in various notifications from the Ministry of National Food Security and Research. Under these procedures, fertiliser producers and importers were expected to supply agricultural inputs to the market at subsidised rates and subsequently claim the subsidy from the government.

Back in 2017, Profit reported that 52 lakh farmers would benefit from a subsidy of Rs 150 per bag of Diammonium Phosphate (DAP) fertiliser.

With the upcoming budget for this year, which will likely include a relief package for farmers, and considering the recent government’s pattern of making significant announcements prior to the budget, such as the Kissan Package or Khadim-e-Kisan Package, the government’s primary focus should be on clearing the long overdue subsidy payments to importers, who had placed their trust in the government. Additionally, assurance should be given to the Ministry that they will be reimbursed for these payments.

The importers of DAP have fulfilled all the necessary requirements for claiming the subsidy amounts, and some payments were even made until 2018. Fortunately, the entire quantity of DAP supplied by importers can be easily verified through the import paperwork, specifically customs clearance and sales tax returns. However, despite such clear evidence, the government continues to ignore the issue and hold on to the payments.

As it stands, if local companies are not given encouragement and their outstanding payments are further delayed, it will have a severe financial impact on the local industry and the market for DAP fertiliser.

Over the past few years, more than 50% of fertilisers supplied to farmers have been imported. The commercial importers have diligently ensured market-based competition and, as instructed by the government, have maintained lower domestic prices for DAP fertiliser.

The question that now arises is what steps local importers are required to take, in order to make their voices heard. Despite numerous communications and correspondence through written letters submitted to the Finance Division, no one seems willing to consider and settle the owed amounts. This directly affects the trust of local commercial importers, who have supported the government every step of the way. On one hand, the government aims to encourage local industries to invest and have a significant stake, while on the other hand, the failure to pay the due amounts continues to shake the confidence of suppliers and discourages further investment in this sector. Ultimately, this will result in losses for the country.

Hamza Nizam Kazi
Hamza Nizam Kazi
Hamza is a corporate and technology lawyer having experience in the telecom industry and advising digital startups. He can be reached on [email protected] for advice on legal and regulatory issues pertaining to the telecom sector and electronic media.


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