Federal cabinet orders provision of subsidy directly to farmers, not fertiliser industry

Petroleum Division tasked to monitor cabinet’s decision regarding ending of subsidy and charging full price of gas from fertiliser industry

ISLAMABAD   -   The federal cabinet has tasked the Petroleum Division to monitor the cabinet’s decision regarding the ending of subsidy and charging full price of gas from the fertilizer industry.

Instead, the cabinet has decided the provision of direct subsidy to the farmers, where required, official source told The Nation. The federal cabinet ratified the summary submitted in the context of direct provision of subsidies to the farmers.

The cabinet directed that “the fertilizer plants shall be charged the full price of gas supplied to them, whereas subsidy shall be provided directly to the farmers, where required,” the source said. “The cabinet further directed the Petroleum Division to monitor the implementation of the process related to the implementation of the cabinet decision,” the source maintained.

The decision to provide gas at full price will push up the rates for the fertilizer manufacturer by Rs 217 per mmbtu. In its meeting held on May 14, 2024, the federal cabinet had decided discontinuing the provision of subsidized gas to the fertilizer industry. During the cabinet meeting, the Petroleum Division explained that in case of provision of gas to the plants at the OGRA notified price, the price differential would either have to be borne by the domestic consumers or must be subsidized by the Finance Division. Ministry of Industries and Production explained, during the meeting, that the benefits of subsidized gas to fertilizer plants had not trickled down to farmers, which was evident from the absence of any corresponding decrease in the price of urea. It was suggested during the cabinet meeting that the distortion in the pricing of gas for the fertilizer sector should be removed, the source said. The Finance Division, in view of financial constraints, also did not endorse the proposal of provision of further subsidy on gas to meet the resultant price differential. On consideration of these aspects, the cabinet reached the unanimous conclusion that gas to fertilizer plants should be supplied at full price rather than subsidized price, the source said.

After keeping it at the lowest level for decades, in the ongoing fiscal year the federal government had upward revised the gas prices for fertilizer plant to Rs 1597 per mmbtu against the sale price of gas i.e. Rs 1814 per mmbtu. In case the government decided to charge the fertilizer plants the sale price of gas the rate for the fertilizer will go up by Rs 217 per mmbtu. It is worth noting that on Monday the Economic Coordination Committee (ECC) of the Cabinet had extended the provision of subsidized LNG to two Punjab-based fertilizer plants, at Rs 1597 per mmbtu, for six months (March 31, 2024, till September 30, 2024).

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