After government’s decision to impose Gas Infrastructure Development Cess on different industries, including fertiliser sector, feed stock gas’ price for fertiliser sector would increase from existing Rs102 per mmbtu to Rs299 per mmbtu, an increase of Rs197 per mmbtu which would result in increase of urea price by Rs250 to 300 per 50kg bag, sources told Profit. Government has also increased the prices of fuel gas for fertiliser plants by Rs15 from current Rs433 to Rs448 per mmbtu. Cess would be charged from 1st January 2012, said sources.
Gas Infrastructure Development Cess Bill which has been passed by National Assembly and Senate both for imposing cess on different industries including fertiliser sector is likely to increase feedstock gas prices by 200 per cent. Price hike in feed gas cost would result in increase of urea price by Rs250 to 300 per 50kg bag. National Assembly of Pakistan approved two money bills to give free hand to the federal government to fetch around Rs38.39 billion every fiscal year by imposing Gas Infrastructure Development Cess and Petroleum Levy.
Rise in feed gas price by 200 per cent will create cost vacuum of Rs250 per bag which has to be filled by a price increase in order to negate the impact. Government says this decision has been taken to meet the hefty expenditures of several projects including Iran Pakistan (IP) Pipeline, Turkmenistan Afghanistan Pakistan India (TAPI) Pipeline, LNG import and LPG supply enhancement projects. A major portion of around Rs11.10 billion would be gathered from the fertiliser sector, Rs1.87 billion from CNG station, Rs5.88 billion from Independent Power Plants (IPP’s), Rs4.62 billion from industrial sector and Rs0.460 billion from Pakistan Petroleum Limited (PPL). OGRA has already tabled a proposal to increase the gas price in the country by 15 per cent that would also bring an impact of Rs45 in proposed per mmbtu price of feed stock gas for fertiliser sector. Fertiliser plants use 80 per cent of the gas as feed stock while remaining 20 per cent is used as fuel to run the plants.
The imposition of the gas cess would make the urea expensive for the farmers who may resort to using lesser urea due to erosion of purchasing power of the farmers. This measure is expected to aggravate food inflation as the rise in cost would be passed on to the end consumers and may lower crop yields due to lesser urea consumption.
