Fertiliser�industry, Farmers Are Suffering Due To Higher Cost Of Production

� Islamabad, (Pakistan Point News - 01st Mar, 2018) : The stakeholders of fertilizer industry and the farmers are seriously concerned about the long-term economic impact �by the higher cost of production�caused by�the excessively high rate of 'Gas Infrastructure Development Cess' (GIDC), being charged on the feedstock gas provided to�fertilizer manufacturers. This essential sector is being unfairly subjected to the highest rate of GIDC, as compared to all other industries.

� This discriminatory tax-regime places an unnecessary financial burden on a sector which plays a pivotal role in agricultural growth. The high rate of GIDC significantly increases the manufacturing-costs, but the manufacturers are unable to increase their retail prices, due to price-capping and regulatory restrictions. The fertilizer industry cannot sustain these additional costs, unless they are allowed to pass-on the cost-impact on the farmers.

� Year after year, the Government of Pakistan has been weighing down the Fertilizer industry with this cess, which was imposed on various industries in 2010, through an ordinance, with an aim to ensure sufficient supply of Natural Gas to each sector. But, later, the ordinance was�declared null and void by Peshawar High Court and subsequently; the Supreme Court of Pakistan (SC) upheld the decision. The present GIDC Act was passed in 2015, but remains sub-judice for being unreasonable and against the government policies aimed at facilitating agricultural productivity � the backbone of Pakistan's economy.

� The GIDC Bill 2015 passed by the National Assembly, states that the revenues generated through the 'Cess' shall be utilized by the Government for the development of Gas-infrastructure, which includes major trans-national projects and LNG imports, etc. According to the '2nd�Schedule' in the GIDC Act 2015, later revised by the Government, the maximum rate of GIDC applicable on the fertilizer industry is; Rupees 300 per MMBTU of gas consumed for Fertilizer Feed�(used as raw-material for�of fertilizers), while a GIDC rate of Rupees 150 per MMBTU is being charged on Fuel-Gas for consumed during fertiliser production.

The accumulated impact of GIDC doubled the prices of gas for fertiliser industry in Pakistan as compared to the international fertiliser producers.� � Pakistan's fertilizer-manufacturers deserve tax-relief with lower rate of GIDC, because they are making optimal use of the country's depleting Gas reserves. Being the biggest consumers of natural gas, they are using gas as a basic raw-material to produce fertilizers. They are not burning gas simply to fuel their factories.

The government must consider the huge contribution of this sector, with billions of Dollars of investments, to boost the agricultural productivity in the country. Thus the tax-burden on this industry must be reduced, to enhance food-security on domestic and international scale, since Pakistan exports food-stuff and agricultural-produce in very large quantities. � The subsidy granted to the fertilizer industry is not actually support to the manufacturers but to the farmers.

The industry besides bearing additional financial burden to support Government's initiative for cheaper fertilisers, are running from pillar to post for payment of subsidy. �'Cess' has often compelled the manufacturers to demand an increase in fertilizer prices, which goes unheard.�If this unfair policy continues to burden this essential industry, it will negatively impact the well-being of the masses.��Fertilizer plants on Mari gas field are investing billions�on compression & transmission infrastructure and incurring significant OPEX just to sustain production, as the pressures are continuously falling because of fast depletion of gas reserves.

�No adjustment of such expenses in gas cost (same as SNGPL or SSGCL consumers) is allowed.�Today over 15 billion Rupees have been spent by affected fertiliser plants.�� Although the stated objective of the Cess was to ensure sufficient gas-supplies, but the tax-paying fertilizer companies are still suffering due to curtailment of Gas supply for several years now.�Gas at applicable/affordable rates is not being provided to Network based Companies to utilize the installed capacities. To ensure food security in the country, Govt. is advised to ensure gas supply to fertilizer manufacturers at internationally compatible rates.�Further,�tax-revenue being collected for a specific purpose must be utilized, with complete transparency, for its defined purpose.