GIDC withdrawal

The government has notified the withdrawal of Gas Infrastructure Development Cess (GIDC) on the gas consumed by fertilizer manufacturing industry to bring down its price for the benefit of farmers. This levy was being collected by fertilizer companies from farmers after the enforcement of legislation in this regard in 2012. Since then it was collected from farmers but the accumulated amount of Rs.533 billion had not gone to the national exchequer. Hence the decision of the present government to waive off Rs.210 billion to fertilizer companies last year invited scathing criticism from print and electronic media and decision had to be immediately reversed.

The new notification will help bring down the price of Urea by Rs.300-400 if the likely increase in gas tariff does not come. Currently, the market price of price of 40 kilogram bag of this fertilizer is Rs.2100, inclusive of 2 percent sales tax.

The paltry reduction in fertilizer price may not increase the net return ratio (NRR) for farmers, which is less than one. The exemption in sales tax, subsidy on other inputs including better quality seeds, insecticides, pesticides and reasonable increase in minimum support price of cereal crops can help increase the profit margin of small farmers, leading to substantial boost in agriculture output.