ONE of the biggest challenges currently faced by the fertilizer industry is the issue of cash-flow due to a long delay in the reimbursement of subsidies.

The government had committed to pay the subsidy within 15 days, but this has been delayed by several months now. The industry has nearly Rs15 billion worth of subsidy claims stuck due to unnecessary procedural complexities and the inadequate capacity of the departments deputed to scrutinise the claims.

If the authorities do not have the expertise to verify these authentic documents, it does not mean that the industry is being dishonest or is involved in a financial scam. This reflects the poor commitment and capability of these government institutions.

Since the timely verification and payment of the claims has not been possible, the government is now being urged to consider the industry’s suggestion to completely abolish the General Sales Tax on input and outputs of the fertilizer industry.

This way, the next budget will pass on the same price-advantage to the farmers, without putting any financial pressure on the fertiliser companies. The GST is almost equivalent to the current subsidy on urea.

At present, Pakistan has an inventory of nearly 1.5 million tonnes of urea, so the industry experts have suggested allowing the export of one million tons, until the end of 2017, to earn precious foreign exchange revenues and avoid financial burden of maintaining the huge inventory.

Adnan Ali Mughal

Islamabad

(2)

THE Economic Coordination Committee (ECC) has allowed the exports of 300,000 tons of urea to reduce excessive inventory and also fetch badly-needed foreign exchange. The earlier allowed quantity of a similar level could not be exported due to stringent timelines added by the State Bank of Pakistan.

The SBP expects the companies to export the allotted quota within 45 days, blindly following the guidelines of the sugar export policy. This is not possible due to logistic difficulties of a different nature and frequent disruptions caused by border tensions, as the bulk is expected to be exported to Afghanistan.

Thus the ECC, understanding the difficulty faced by manufacturers, has allowed export until the end of the year. Now the SBP, being the final authority to monitor exports, needs to realise that the sugar export model can’t be replicated in toto for urea exports. Failing to deliver on the contracts will be very embarrassing for the exporters.

It is hoped that unnecessary restriction and threats of penalty will be removed to ensure the smooth operation of urea exports.

Shahid Saleem

Islamabad

Published in Dawn, May 25th, 2017