Is Fertilizer Industry being isolated from Gas price hikes at large?

Karachi, February 14:  In times of aggravating macro-economics in the country, the GoP’s decisions have yet again proven to be a serious impediment in rejuvenating business confidence.  Government’s incoherent and inconsistent policies are sending out a message that is completely in stark contrast to its narrative in the mainstream media.

On one hand, the Government in order to meet the stringent directions of IMF has been involved in a perpetual debate to eliminate subsidies while on the other hand, it dismisses proposals regarding it. The recent move to increase gas prices in the country is reeking of unfair treatment to certain industries.

Initially, OGRA proposed a list of increments in the gas prices for specific consumers which was then revised by the Ministry of Energy (Petroleum Division).The initial recommendation by OGRA proposed for a 71% increase in gas prices for the textile sector, despite being the core base for country’s exports.

Similarly, fertilizer industry was passed on with an increase of 136% and 32% on feed and fuel respectively, reducing the amount of subsidy meted out to the sector. Even with this increase, the fertilizer would have been at a significant discount over general industry pricing.

The subsequent revision in prices by Ministry of Energy (Petroleum Division) suggests that gas prices would be increased by 27% for the textile sector whereas the increase for Fertilizer industry is being considerably reduced to 5% on feed and 31% on fuel, according to the sources. This clearly depicts a partisan approach towards different sectors and creates a sense of prejudice.

The supposed burdening of the fuel rate dilutes the impact on the fertilizer industry as fuel component makes up roughly 20% of the industry’s gas consumption. The major proportion of the gas in the fertilizer business is consumed in the form of feed gas.

In effect, the gas price increase for the sector merely translates into 17% increase on weighted average basis. In comparison to 27% increase for the textile sector, the increase for fertilizer industry alludes to a result of flawed decision-making on the Government’s part.

The resultant effect negates Government’s desire to curtail the worsening GDS deficit and looming circular deficit situation in the country. Moreover, with continued subsidy to specific sectors, it leads to a disproportionate contribution to the reduction of GDS deficit.

The tall claims of uplifting zero-rated sector, which happens to be at the forefront of GoP’s vision to transform the economy into an export-led economy, has fallen flat amid the recent gas price increases.  The government needs to strike some sort of coherence between its claims and the actual decisions taken on the issues.

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