Increase in GST hits urea sales

ISLAMABAD: Increase in the General Sales Tax (GST) led to a drop in urea sales in June 2013, compared to the same month last year. Urea sales picked up in the first week of June after ample rainfalls and higher activity was expected for Kharif sowing which begins in July. However, overall urea off-take in June 2013 was 45 per cent less than sales in June 2012, with the decline beginning after June 12 this year when the additional GST was announced. Analysts said that sales were high in June 2012 when there were rumours of increase in the GST. However, the incumbent government increased the GST which caught the buyers unawares, they added. However, overall urea sales for six months of the current calendar year were almost the same as in the six months of the previous year at 2.7 million tonnes. Besides the market share of locally produced urea improved from 70pc in the six months of 2012 to 81pc of the half year period of 2013. The National Fertiliser Development Centre (NFDC) has said that higher urea production was due to improved gas supply position, particularly for Engro, that resulted in significant drop in urea imports. Analysts said that imports have also declined due to high rates in the international market rates this year compared to last year when urea was cheaper in foreign markets. Urea imports dropped by 73pc to 239,000 tonnes in January-June 2013. “Urea is around Rs1700-1750 per bag of 50kg, which is cheaper by around Rs800 per bag compared to the international markets,” said Khurum Schezad of Arif Habib Limited. It is expected that in the remaining six months of the year 2013, urea imports are likely to improve to at least 425,000 tonnes. The analysts calculated that 50,000 tonnes of urea is expected to arrive in July, 2013, and tender for import of 75,000 tonnes is expected this month; 225,000 tonnes approved but not yet awarded, while 75,000 tonnes of urea is remaining of the Saudi support facility. However, the import arrangements for the net six month of 2013 were still 53pc lower compared to urea imports in the second half of 2012, but if the decline in international prices the subsidy given on imported urea will also decline. Our Staff Reporter from Lahore adds: The usage of fertiliser, which touched 6.5 million tonnes in 2009 in the country, has decreased to 5.3m tonnes – a drop of 1.2m tonnes – depicting lower consumption because of supply and price issues, executive director of Fertilizer Manufacturers Pakistan Advisory Council said. Addressing a press conference on Monday, Shahab Khwaja said the prices have increased because of imposition of GST, Gas Infrastructure Development Cess (GIDC) and unprecedented gas curtailment for SNGPL-based four fertiliser plants with an aggregated production capacity of approximately 2.3m tonnes. Urea application on soil contributes to around 25 per cent in crop yield and with no urea, there will be 40kg less wheat per acre and it will cost the country Rs24 billion a year and raise flour prices. The total per acre fertiliser cost in 2008-09 was Rs4,450 which has increased by 83pc and touched Rs8,125 per acre for the average farmer.