Subsidy to LNG fertilizer plants

Subsidy to LNG fertilizer plants

The dust of massive subsidy doled out to sugar mills is yet to settle down that Economic Coordination Committee (ECC) of the Cabinet has taken yet another skewed decision, approving a subsidy of Rs.6 billioniIn gas price to two RLNG fertilizers plants. The LNG is being imported from Qatar at highly inflated price of $13 mmbtu under a shady made with Qatar by the last PML-N government, which include “take or pay clause”, as compared with the price paid by other countries of the region. The beneficiary fertiliser companies include Agritech and Fatima Fertilizers, which produce Urea. The ECC decision will result in the outflow of foreign exchange of $36 million out of foreign currency reserves starved country.

The Urea fertilizer output is surplus as indigenous gas consuming industry have produced 2.93 million tonnes of the commodity in the outgone fiscal year against the estimated demand of 2.6 million tonnes. The actual demand may be less as the current market price of Urea is Rs.2100 per 40 kilogram bag, inclusive of sales tax. Small farmers cannot afford such an high price. Will ECC take another decision to give subsidy to fertilizers’’ cartel on the export of Urea as it allowed to sugar mills’ owners? Are its decisions are influenced by certain unelected individuals in the corridors of powers, who have major stakes in the cartel of agriculture inputs.

The fertilizers cartel had reaped windfall gains by collecting and withholding Gas Infrastructure Development Cess (GIDC) of RS.534 billion after the enactment of legislation made in the last PPP government. The amount collected on account of this levy had not been deposited in the national exchequer. The Ministry of Petroleum and Natural Resources had told this to the Supreme Court in January during a hearing GIDC surcharge case. A report submitted by the Ministry in the Apex Court said that till June 2019 a total of Rs.752 billion was collected on account of GIDC. To add insult to injury, a Presidential Ordinance was promulgated in August last year to waive off Rs.208 GIDC liabilities to few industries, including fertilizers, IPPs and CNG sector, in addition to writing off late payment surcharge. The Ordinance was then withdrawn when its Nitti Gritty was exposed critically in print media and electronic media.

After making public Inquiry Commission Report on sugar shortages, Prime Minster Imran Khan lamented that Competitive Commission of Pakistan (CCP) had not done its mandated job of reigning in food commodities’ cartels. But when ECC decisions protect cartels then what can CCP do. In a Press Conference in Lahore on Saturday, Railway Minister Sheikh Rashid Ahmad has referred to the decisions taken for recent reduction and hiking of petroleum products prices, which damaged the image of the government. Such like decisions raises pertinent questions. Is Pakistan’s economy like the one featured in an English Movie, titled “Corporate America?” The movie tells how multinational companies and weapon manufactures influence government decisions in the US. In case of Pakistan cartels call shots in decision making as they are the rulers of commodities domain.

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