Govt considers cess on fertiliser firms to recover windfall gains

The federal government is examining options to impose a cess on fertiliser companies to recover windfall profits for farmers’ benefit, with a committee comprising the ministers for petroleum and climate change, the finance secretary, chairman of the Federal Board of Revenue (FBR) and the national coordinator of the Petroleum Sector Task Force formed to evaluate mechanisms for implementing the proposal, Business Recorder reported, citing official sources.

A committee comprising the ministers for petroleum and climate change, the finance secretary, chairman of the Federal Board of Revenue (FBR) and the national coordinator of the Petroleum Sector Task Force has been formed to evaluate mechanisms for imposing a cess on the sector.

The proposal was initially presented by FBR Chairman Rashid Mehmood Langrial before a committee led by the deputy prime minister, which oversees gas pricing and fertiliser gas allocations.

During discussions, the climate change minister said gas allocation to fertiliser plants should be reviewed in view of declining supplies in the Sui network. He argued that the Weighted Average Cost of Gas (WACOG) offers a long-term solution and suggested that industries facing high gas tariffs be treated uniformly. He also proposed treating gas allocation as import substitution and investing through the Public Sector Development Programme to process low-BTU gas for price equalisation under WACOG.

The petroleum minister informed the committee that new gas allocations would materialise after two years and that supply issues of three fertiliser plants connected to the network would be resolved. He said contractual commitments must be upheld and confirmed that the Petroleum Division has sought legal opinion on reopening existing pricing and gas supply agreements. He recommended separating the issue of windfall profits from gas allocation decisions.

The FBR chairman outlined options for recovering excess profits, including a windfall tax on income, adoption of a model similar to Independent Power Producers (IPPs) with defined return parameters, or creating an escrow mechanism through which excess earnings would be retained and later transferred to farmers.

The deputy prime minister noted that low-BTU gas cannot be injected into the transmission network without significant investment, which cannot be financed through the PSDP. He added that depletion of natural gas reserves can only be addressed through new exploration and production efforts.

Special Assistant to the Prime Minister Tariq Bajwa proposed imposing a legally backed “Agriculture Development Cess” with proceeds reserved for farmers.

In December 2025, the federal cabinet approved fresh gas allocations to fertiliser plants, shifting them to a Mari-based standalone supply system. Under the plan, gas from Ghazij and Shawal discoveries has been allocated to Fauji Fertiliser Company (Port Qasim), Fatima Fertiliser (Sheikhupura) and Agritech (Daudkhel). Additional volumes have been reassigned to Engro Fertiliser’s base plant at Mari.

The fertiliser companies will install processing and compression facilities to handle low-BTU gas, with an estimated investment exceeding $200 million, to be borne by the industry. Bilateral gas sale agreements will be signed with Mari Energies, alongside third-party access arrangements with SNGPL and SSGC. Gas swap arrangements will be used for supply to the Port Qasim plant due to network constraints.