Fertilizer subsidy remains unpaid despite Government’s promises

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Fertilizer subsidy remains unpaid despite Government’s promises

Lahore: 28th August, 2017 – The Government of Pakistan is still dragging on the issue of fertilizer Subsidy-claims. Billions of Rupees in subsidy payments are continuously stuck up due to Red-tapism  and institutional lethargy.  One whole month has passed since the Ministry of National Food Security & Research (MNFS&R) was directed by Prime Minister’s Office to release all these pending amounts urgently, but still nothing has been done to reduce the financial burden. It was decided at high level meeting at PM Office, chaired by Secretary to PM Mr Fawad Hassan Fawad on 24 July that 80 percent of the total subsidy claims will be immediately released and remaining twenty percent will be paid within three months after third party validation. To the much frustration of industry, the payments are still pending, with lame excuse of non availability of funds. Whereas, Finance Division has already released the requisite amount, thus holding of payments does not make much sense.

 

Similarly, for future subsidy mechanism,  the government has included an unnecessary restrictive clause in the scheme; where the government asks for National Tax Number (NTN) of every fertilizer dealer. This clause makes this scheme non-viable as it ignores the fact that; a big majority (over 90 percent) of the smaller dealers are not registered with the taxation authorities and do not have NTNs. Moreover, the subsidy claims are based on sales tax, which has no relationship with NTN. Hence, such a step may ultimately hamper the distribution of Urea denying the subsidy-benefits to the farmers.

The authorities have not even started the external-audit process, required to resolve this subsidy-crisis, which is really debilitating for the national economy. The MNFS&R has still not issued the Terms of Reference (TORs) about this external audit of the fertilizer industry.

 

Although the fertilizer industry is facing numerous cash-flow challenges, created by more than 20 Billion Rupees of outstanding subsidies, these companies have acted very prudently and kept the urea prices down in the Pakistan market. The fertilizer producers are cooperating with the government by absorbing 106 rupees per bag to keep the prices low, although, the government has promised to pay Rs. 100 per bag as subsidy.

 

Fertilizer Manufacturers of Pakistan Advisory Council (FMPAC) reiterated the industry’s pledge to work cohesively with the government to resolve the subsidy crisis. The official  further said: “The government must appreciate that the fertilizer industry is the highest contributor to the national exchequer, as it plays a vital role in agriculture growth. The fertilizer companies are waiting patiently for a favorable response from the government. We have not disrupted the supply of subsidized fertilizers to the farmers, despite the major cash-flow problems we are facing.”

 

An amicable solution of this subsidy crisis is eagerly awaited. The concerned officials must take personal interest in this matter, to ensure that the benefit of this subsidy continues to reach the farmers, and the supply of urea in the market remains uninterrupted. The Ministry of Finance, FBR, State Bank and the MNFS&R are expected to accelerate their efforts to reduce this financial pressure and simplify the procedural complexities in the subsidy scheme.