KARACHI, Nov 1: Early Tuesday morning, investors at the Karachi Stock Exchange were greeted by a disturbing development at Engro Corporation --the fertiliser-to-food conglomerate.

The company told the exchange that late on Monday night the officials of the excise department had “arrived at the Daharki fertiliser plant of our 100 per cent subsidiary, Engro Fertilisers Limited and informed plant management that they had verbal orders not to allow any urea shipment to leave the plant.”

In its dispatch to the exchange, the company maintained that the “action is clearly illegal as no excise duty is payable on urea fertilizer.”

The company, however, was said to be trying to “engage with the government to understand the reasons for this action and to resolve the issue amicably.”

At mid-day, a company official said on queries that discussions had started with the Excise Department, but he said that things would be clearer by the next morning.

Market sources were consensus in their view that the action had been initiated as an “arm twisting” tactic, a day after Engro announced a massive increase of Rs400 or 25 per cent in price per 50kgs bag of urea.

On Monday, the board of directors of Engro Corporation declared the company's financial results for three-quarters to Sept 30, reporting profit at Rs5.59 billion and earning per share at Rs14.21 (basic & diluted).

The company stood its ground in respect of price hike, saying that it had to be done to protect the bottom line, which was under immense pressure due to the continued gas shutdown and inaction by the government thus far to the Sindh High Court decision of Oct 18. The court had ordered complete restoration of 100 mmcfd of gas to the plant in strict accordance with SNGPL contract and sovereign guarantee.

Engro Fertilisers Limited has increased the price of urea by Rs400 per bag to Rs1,980 per bag inclusive of GST effective Oct 31, 2011, which analysts said was the fifth raise this year.

The company stated that the Engro plant with an annual production of 1.3 million tons annually (set up in Dec 2010) had not received gas for 148 days in 2011.Analysts calculated that at the price of Rs1,980 per bag (Rs1,707 ex-GST), the local product was at discount to international urea prices by 32 to 40 per cent.

The past trend suggested that other urea producers would follow in the footprints of Engro and match the selling price.

Yet in the entire tripartite tussle among the government, the urea producers and the gas suppliers, the ultimate sufferer is the farmer.

Sources suggested that in several agricultural zones, the 'dealers' or 'middle-men' had already started to charge farmers the new Engro price. Industry insiders said that the Rabi season, wheat crop was likely to be hit as the urea price had shot over the head of farming community.