Engro cuts urea prices by Rs160 per bag.

Byline: Kalbe Ali

ISLAMABAD -- Engro Fertilizers on Friday reduced per bag urea pries by Rs160, while sources said that Fauji Fertilizer is also expected to cut prices by Rs300 as well.

The announcement came after the Economic Coordination Committee (ECC) of the Cabinet on Jan 28 cut Government InfrastAructure Development Cess (GIDC) on manufacturers from Rs450 to Rs50 per mmBtu applicable on natural gas supplied to the sector.

Engro Fertilizer decided to pass on the benefit of GIDC reduction by announcing a cut in prices of 50kg bags by Rs160, effective from Feb 1.

Meanwhile, Fauji Fertilizer said the urea prices would likely by reduced by around Rs300 per bag but the company would make final decision in this regard after the feedstock and fuel gas prices for fertiliser industry were notified.

The fertiliser sector is dominated by three major players with Fauji Fertilizer Company (FFC) being the largest one with annual production capacity of 2.45 million tonnes, Engro Fertilizer with 1.95m tonnes per annum followed by Fatima Fertilizer operating two plants - Sadiqabad and Pak-Arab Fertilizer with total production capacity of 1m tonnes per annum.

Another manufacturer likely to reduce rates by Rs300

The impact of GIDC reduction varies for different manufacturers across the country, based on their incorporation date as those units established prior to the announcement of Fertilizer Policy, 2001 have to pay Rs300 per mmBtu as feedstock. Whereas, those units established post-2001 policy were offered gas feedstock rates at $0.70 per mmBtu.

'The policy was formulated to attract investments as Saudi Arabia was offering the rate of $0.70 per mmBtu and the government decided to match the incentives,' said a senior Engro Fertilizer official while adding that the move resulted in investment of more than $1bn by the company in shape of a new plant.

The official added that Engro receives gas under fixed-price contracts and the GIDC was not applicable on them.

Engro has three plants in Daharki, Sindh, two of those with a production capacity of 1.3m tonnes per annum were established after the 2001 Policy and the company claims that GIDC was...