ISLAMABAD: The local fertiliser industry is providing urea at around 84 per cent discount, equivalent to Rs9,823/bag and is expected to enable import substitution of $5.3 billion in 2022.
Discussing the latest business results and future outlook in the first quarter, Imran Ahmed, chief financial officer of Engro Fertilisers, said that the fertiliser sector is passing on a benefit of Rs900 billion/annum to farmers through the provision of urea at significant discount to current global prices.
Over the last 10 years, the industry has passed on the benefit of over Rs1.4 trillion to the farmers through lower urea prices. This amount is four times higher than the benefit that the industry has received through gas pricing under the Fertiliser Policy 2001.
At the same time, the industry has been playing a significant role towards reducing the country’s trade and fiscal deficit, as the country is self-sufficient in urea production.
In the last annual general meeting of the company, the shareholders expressed concerns over the sharp disparity between international and local urea prices. The company has been losing shareholders’ value by pricing urea at a significant discount to import parity, they said.
Ahmed emphasised that the urea demand has increased 17 per cent in the first quarter of 2022, compared with the same period of the last year.
The company’s research indicates that, as per the crop mix and cultivated area for the first quarter, there has been an estimated increase of 2 per cent in agronomic demand.
This situation may in part be due to advance buying by the farmers but also indicates a strong probability of product movement across borders emanating from significant disparity among the local and international urea prices, he added.
Ahmed also highlighted the challenges being faced by the fertiliser industry, including recoveries of outstanding subsidy and sales tax receivables from the government, disallowances made under the income and sales tax for sales to unregistered dealers and the Federal Board of Revenue’s (FBR) clarification on concessionary Customs duty withdrawing the concession/relief given earlier.
The continued government support will be required to resolve these pressing matters, which will allow Engro Fertilisers to continue to play its role in transforming the agricultural landscape of Pakistan and to ensure long-term food security in the country, he added.