The fertiliser sector in Pakistan has responded to the imposition of taxes and duties by increasing prices of urea and di-ammonium phosphate (DAP), shifting the burden onto consumers.
The Finance Bill 2023 introduced a 5% federal excise duty (FED), resulting in an impact of approximately Rs 125-150 per bag of urea and around Rs 470 per bag of DAP. Notably, the tax exemption on DAP was removed without allowing differential claims.
In response to these increased costs, companies within the fertiliser sector have raised prices. Fauji Fertiliser Company (FFC) increased urea prices by Rs350 per bag, while Fauji Fertiliser Bin Qasim Limited (FFBL) raised prices by Rs 162 per bag. Both companies also announced a DAP price hike of Rs480 per bag.
Farmers are facing difficulties as the agriculture sector is already under stress and recovering from flood losses, according to Mahmood Nawaz Shah, Senior Vice President of Sindh Abadgar Board (SAB). He expressed disappointment that the government burdened the sector with additional taxes instead of focusing on supporting agriculture in the budget.
Urea and DAP are the most widely used fertilisers in Pakistan, and the increased costs will add to the already high production expenses.
While input prices are rising, commodity prices are not increasing at the same pace. This situation hampers efforts to improve crop yields and support agriculture. Currently, urea prices are at Rs3,212 per bag, while FFC and FFBL’s DAP prices are at Rs9,995 per bag and Rs10,045 per bag, respectively.
Despite the challenges, the budget also included pro-agriculture measures aimed at managing food inflation and maximizing export potential. Allocations were made for research and development in agriculture, ensuring the availability of quality seeds, solarisation of tube wells, and financing for agricultural machinery.