Pakistan. Sale of imported urea approved by ECC

19.08.2016

Economic Coordination Committee (ECC) of the Cabinet on Thursday approved the sale of imported urea available at the National Fertiliser Marketing Limited (NFML) at Rs 1310 per 50 kg bag on the recommendations of Finance Ministry. Presided over by the Finance Minister, Senator Ishaq Dar, the ECC was informed by the Ministry of Industries and Production (MoI&P) that Cabinet in January 16, 2014 had decided to equate the price of imported Urea fertiliser with the price then in force ie per bag of domestically purchased Urea ie Rs 1,786/- per 50 kg bag.

Accordingly, the Ministry implemented the decision through National Fertilizer Marketing Limited (NFML). During the Rabi Season 2015-16, the sale of Urea fertiliser decreased drastically owing to a decline in prices of the commodities globally having an adverse effect on domestic prices of wheat, rice and sugarcane. The off-take of urea fertiliser has thus remained depressed.

Presently, NFML is carrying a stock of 276,000 metric tons of imported urea at its godowns across the country. A total of 344,000 metric tons was imported during Kharif - 2015 (April - September 2015). A quantity of 67,900 metric tons was sold until July 31, 2016, leaving an unsold balance of 276,000 MT.

During his budget speech, the Federal Minister for Finance had announced to fix the price of urea fertiliser at Rs 1,400/- per 50 Kg bag for end user. NFML has however, requested for a reduction in the price of imported urea fertiliser from existing Rs 1,7861 to Rs 1,260/- per bag. The basis for the proposed reduction in the price of imported urea fertiliser is that private producers supply/deliver urea at dealers'' sale point while NFML''s dealers lift stock from NFML godown and pay up to Rs 50/- per bag as freight charges.

Further, there also exists a significant difference in market price of branded (local product) and imported urea as farmers prefer branded product; NFML receives urea from Trading Corporation of Pakistan (TCP) at port and transports stock to its Godowns for its further sale to dealers and the NFML pays back to TCP the amount after sale of urea by deducting Rs 21 (bag as service charges). Now, stock is lying in godowns, therefore, no payment is being made to TCP; carrying cost of urea stock is approximately Rs 3.5 million per month which is an additional burden on NFML and it is difficult to cover these charges against a meagre income of Rs 21 per bag deducted as service charges.

The decision to reduce the imported Urea price will help promote sales enabling NFML to make payment to TCP, curtail further the accumulating bank interest and reduce NFML carrying cost being incurred against urea stock.

The ECC was informed that the draft Summary was circulated amongst the Finance Division, Ministries of Commerce and National Food Security & Research for views / comments. The Finance Division has proposed that price of imported urea should not be reduced beyond Rs 1, 310 per 50kg bag. Ministry of Commerce informed that at current selling price ie Rs 1, 786 per 50kg bag the financial implication is Rs 2.129 billion for current stock up to June 2016.

A further reduction from Rs 1, 786 to Rs 1, 260 would have an additional financial implication of Rs 2.904 billion. Thus the total financial implication would be Rs 5.033 billion. Ministry of National Food Security & Research supported the price reduction up to the level of Rs 1,400 per 50kg bag.

In view of the foregoing, approval of the ECC of the Cabinet is solicited to the reduction in price of imported Urea fertiliser lying with NFML ie 276,000 MT from Rs 1,786 to Rs 1,310 per 50 kg bag, as proposed by Finance Division as long as subsidised price fixed by GoP @ Rs 1,400 per bag remains in force. The total financial impact as worked out by NFML on balance 276,000 MT @ Rs 476 subsidy per 50 kg bag would be Rs 2.630 billion.

On the proposal made by the Ministry of National Health Services, Regulation and co-ordination, ECC gave approval to the exemption from customs duty and sales tax on import of Salter scales for Lady Health Workers Program. The UNICEF has provided $1.3 million available under the Gavi HSS-I fund which will be utilised to purchase approximately 38000 Scales and other equipment to be provided across the country to help children affected by stunting. Stunting can be addressed with growth monitoring and nutritional advice during the first three years of a child.

The ECC also granted exemption from tax and duties for import of machinery and equipment/ construction materials to NHA for infrastructure projects under the China Pakistan Economic Corridor. As a step towards cleaner environment and better engine hygiene, ECC allowed the introduction of 92 Research Octane Number (RON) premium motor gasoline (petrol) in Pakistan. Currently, the country is using 87 RON premium, which is almost abandoned by the world. The new arrangement will be effective from the next cycle of PSO tender this year. The new cleaner and efficient fuel will have lower emissions. Ogra will monitor the price as was the case in RON 87 PMG.


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