ISLAMABAD: After the lapse of two months, the government has finally chalked out a formula to provide fertiliser subsidy to end-consumers, reducing the price of urea by Rs390 on a bag and that of diammonium phosphate (DAP) by Rs300.

The Ministry of Food Security and Research has issued a notification (dated Aug 23, 2016) in this regard after the price module was finalised by the finance ministry.

The price of a 50-kilogram urea bag will now drop to Rs1,400 from the existing Rs1,790, whereas the price of DAP will come down to Rs2,558 from Rs2,858. Urea manufactures and DAP makers and importers have been directed to clearly display the revised retail prices on new packing.

With the estimated annual off-take of around 36 million bags, the federal and provincial governments are likely to spend Rs10.8 billion in terms of subsidy on DAP, which will be divided between the Centre and provinces.

As for urea, Rs50 reduction will be borne by manufacturers while the impact of reduced general sales tax from 17 per cent to 5pc is Rs184. Besides, the subsidy by the government amounts to Rs156.

Since the estimated annual urea off-take in the country is 110m bags, the total subsidy for urea has been calculated at Rs17.16bn which will be equally shared by federal and provincial governments.

The provincial contributions based on the traditional off-take pattern of urea will be: Punjab 73pc (Rs6.23bn), Sindh 19pc (Rs1.63bn), Khyber Pakhtunkhwa 5pc (Rs42.9m) while the share of Balochistan will be 3pc (Rs25.70).

Meanwhile, a special account titled ‘subsidy on urea fertiliser’ will be opened at the State Bank of Pakistan. The federal and provincial governments will deposit 50pc of their respective shares of subsidy in this account. The remaining 50pc share will be deposited after utilisation of 80pc of the funds initially deposited.

All urea manufacturers registered with the Federal Board of Revenue under the sales tax regime are eligible for receiving subsidy under this scheme. The cash subsidy of Rs156 per bag will be given to manufacturers by the State Bank on the basis of sale tax returns, while Rs300 subsidy will be given to DAP manufacturers and importers.

Provincial governments will monitor the scheme while the food ministry will be responsible for its implementation.

The government has also announced a subsidy of Rs117 per bag on single superphosphate, which is used in certain cases as an alternative to DAP.

Moreover, a subsidy of Rs88 per bag has been given on calcium ammonium nitrate and other nutrients at similar terms as that of urea and DAP.

Published in Dawn, August 26th, 2016