Don't expect uniform cut, fertiliser makers warn govt after GIDC waiver.

Byline: Nasir Jamal

LAHORE -- The government's efforts for an across-the-board reduction in urea prices could face resistance from some manufacturers as the impact of cuts in Gas Infrastructure Development Cess (GIDC) on industry's cost of production will vary from company to company.

The Economic Coordination Committee (ECC) on Monday slashed the GIDC on fertiliser sector by almost 99 per cent ie from Rs405 a bag to Rs5 with a view of providing relief to farmers reeling under spiking input costs.

The government expects all manufacturers to uniformly revise their prices down by Rs400 per bag after the GIDC cut.

However, a senior Engro Fertiliser executive told Dawn that they would not be able to meet government's expectations.

'We surely will fully pass on the projected reduction in our cost to farmers but you shouldn't expect us to pay the subsidy from our pockets,' he said on the condition of anonymity.

The urea prices in the last year alone have increased from an average of Rs1,600 per bag to about Rs2,000, according to a BMA Capital analyst.

The industry sources said the price had risen from Rs1,800-1,850 level owing to increase in gas tariffs announced during the year.

Analyst Yusuf Rahman told Dawn on Tuesday that reduction in the GIDC would decrease cost of urea producers from Rs412 a bag to Rs38. But the impact varies from firm to firm due to three different types of feed gas tariffs.

Yusuf said the plants on concessionary feed gas had in the past shown much higher earnings than rest of the industry on account of concessionary gas rates and GIDC waiver.

He was of the view the uniform price reduction of Rs400 per bag will severely affect their earnings in 2020.

The fuel gas, however, is provided at the same rate of Rs150/mmBtu.

The GIDC reduction for companies like Fauji Fertiliser getting feed gas at Rs300/mmBtu will help lower their cost by...