NEWS COVERAGE PERIOD FROM JAN 27 TO FEB 02, 2020
FERTILIZER INDUSTRY FACING A CATCH – 22 SITUATION?
By MUSHTAQ GHUMMAN on January 27, 2020
The fertilizer industry is said to be facing a catch-22 situation after reduction in Gas Infrastructure Development Cess (GIDC) rate by Rs 400 per bag of urea from Rs 405 per bag and projected an increase in feed gas price at Rs 100 per bag, expected to be finally approved on Monday (today) by the Economic Coordination Committee (ECC) of the Cabinet.
Well-informed sources told Business Recorder that the financial impact of both decisions has been calculated at Rs 300 per bag of urea which implies that the new price of urea will be around Rs 1740 per bag but what worries the stakeholders is that the small dealers who procured stocks at Rs 2040 per bag are unlikely to sell at Rs 1740 per bag.
Some analysts argue that dealers will not be able to bear the brunt of Rs 300 per bag as they are not financially strong. Presently, fertilizer industry wants to sell its stocks as early as possible prior to notification of reduction in GIDC rates by Rs 400 per bag and increase in natural gas price projected at Rs 100 per bag but dealers are not willing to receive the deliveries at the higher price. Likewise, farmers are also reluctant to procure urea at the higher price after the government announced it is reducing the rate of GIDC by Rs 400 per bag.
Another complication is that two fertilizer companies, Engro and Fatima, which are still enjoying tax incentives under the Fertilizer Policy 2001, are not ready to reduce their prices from current level of Rs 2040 per bag.
Fertilizer Manufacturers of Pakistan Advisory Council (FMPAC) maintains that despite pending decisions and statements by some responsible government officials regarding reduction of price of urea by Rs 400 per bag market sentiment is highly negative, thereby impacting on sales throughout the supply chain including farmers. Such an uncertain market environment in the middle of Rabbi Season is likely to hamper the timely application of fertilizers, impacting negatively on the wheat crop production, besides potentially leading to huge losses to the manufacturers due to prevailing higher cost of production.
According to the Association, Prime Minister Advisor on Commerce, Industries and Production and Investment, Abdul Razak Dawood, was reminded of the meeting on fertilizer on January 16, 2019 whereby FFC took a legal stance on the proposal to prospectively remove/reduce GIDC in full and expressed an inability to pass through its impact, but offered to reduce the price of urea by Rs 400 per bag, whereas, Engro Fertilizer expressed its disagreement to the proposal.
During the meeting, the Advisor was also apprised that any impact of gas cost increase will be passed on. The reduction of price by Rs 405 per bag as impact of GIDC was discussed but not decided, as recorded in the minutes, said Brig. Sher Shah Malik(retired) in a letter to the Advisor on Commerce, Industries and Production and Investment.
Fertilizer industry insiders state that the government’s decision to reduce GIDC by 400 per bag and increase feed gas price by about Rs 100 per bag, has brought the industry’s key players eye ball to eye ball with each other, as it will benefit a few stakeholders while others will suffer a financial loss.
The Government failed to take into account that owing to multiple gas pricing frameworks applicable industry wide, the impact of its proposal will differ from one company to another, said an insider on condition of anonymity.
FFC, which is priced entirely on Fertilizer Policy gas pricing and will be able to reduce its price in proportion to the decrease in GIDC while Fatima Fertilizers receives its entire gas at concessionary rates in line with the Fertilizer policy 2001 owing to its investment in the fertilizer plant as its feed gas is exempted from GIDC.
This implies that fertilizer manufacturers will decrease urea prices at different rates and this disparity will only create confusion in the market. The key beneficiaries of the confusion will be the dealers and large land holders who will use their connections and buying power to secure better prices, while the small farmers will continue to struggle.
According to these insiders, the Government was presented an alternate proposal whereby the decrease in GIDC rates would be concurrent with an equal increase in fertilizer feed gas rates which would have proved to be extremely beneficial for the social and economic interests of the country.
The mover of this proposal claims that this scheme would not create any disparity in urea prices and all farmers would be able to purchase urea at a price determined by market demand and supply dynamics. Furthermore, the move would allow the Government to significantly reduce the growing Gas Development Surcharge (GDS) deficit of state-owned companies which is reportedly nearing Rs 100 billion.
“The Government’s decision has created a lot of confusion among the fertilizer players, the dealers and the farmers. There have been various reports of disagreements among fertilizer companies pertaining to decrease in price, with one leading player having reportedly addressed its concerns to the ministry as well,” said another insider on condition of anonymity.
Industries Ministry also informed the Cabinet at a recent cabinet meeting that a meeting was held with the representatives of the fertilizer industry to consider the measures through which price of fertilizer could be reduced; and was informed that the fertilizer industry had agreed to reduce price of urea per bag by around Rs 400 per bag in lieu of reduction in GIDC.
Copyright Business Recorder, 2020
PTI GOVT NOTIFIES GIDC RELIEF FOR FERTILISER SECTOR
By Our Correspondent Published: January 29, 2020
ISLAMABAD: The government has notified to waive off almost entire Gas Infrastructure Development Cess (GIDC) on gas consumed by fertiliser manufacturers to provide relief to the farmers.
The Ministry of Energy (Petroleum Division) issued a notification in this regard on Tuesday. Earlier, the government had imposed GIDC amounting to Rs300 per mmbtu and Rs150 per mmbtu on feed stock and fuel stock consumed by fertiliser manufacturers, respectively through the GIDC Act 2015. Now, the GIDC rate has been reduced from Rs400 to Rs5 per bag.
The reduction in GIDC applicable to fertiliser manufacturing will lead to Rs360-400/bag decline in urea prices, said industry officials. Urea is currently being sold at Rs2,040 per bag inclusive of 2% sales tax.
In 2012, the Pakistan Peoples Party (PPP) had introduced GIDC for different industries that were using gas as a source of energy or raw material for manufacturing their products. However, the GIDC Act was challenged in court where the companies obtained stay orders and stopped paying the cess.
However, the Pakistan Muslim League-Nawaz (PML-N) government introduced the GIDC Act 2015 and re-imposed the cess on different sectors. Both the governments stated that the main objective of GIDC collection was to generate funds required for the expansion of gas transmission and distribution network.
In August 2019, the Pakistan Tehreek-e-Insaf (PTI) government introduced the GIDC Amendment Act 2019 in order to settle GIDC dues, by waiving 50%, but withdrew it later due to public pressure.
The PTI government increased urea prices approximately by Rs210 per bag due to a rise in gas prices in July 2019 in order to meet pre-conditions for the IMF programme.
In the current scenario, any gas price hike for the fertiliser sector will increase the cost for the farmers given the inflationary pressure. The cost of living is surging while farmers’ income is declining due to lower yields of major cash crops, as was evident from cotton and rice harvests.
Industry officials say that the government, in its effort to appease farmers, has decided to reduce GIDC, claiming impact of around Rs400 per bag of urea. However, the benefit is less likely to reach farmers considering the rumours of gas price increase in the offing. Amid reports of increasing gas prices, reduction in GIDC is likely to have only impact of only Rs120 per bag impact on urea prices.
The GIDC withdrawal will also hold positive to neutral impact for fertiliser manufacturing companies said Usman Arif at Foundation Securities in a research note. Arif has said that the GIDC reduction will be positive for Fauji Fertilizer Bin Qasim Limited (FFBL) while GIDC settlement will hold neutral for Fauji Fertilizer Company and Engro Fertilizer. GIDC will be neutral for Engro Fertilizer as they have assumed imposition of GIDC on concessionary flows of EFERT in base case scenario as per GIDC Act 2015 against market consensus.
Published in The Express Tribune, January 29th, 2020.
FFC EARNINGS PER SHARE INCREASED TO RS13.4 IN CY19
By RECORDER REPORT on January 31, 2020
Fauji Fertilizer Company Limited (FFC) posted unconsolidated earnings of Rs17.1 billion in the calendar year 2019 (CY19) as compared to Rs14.4 billion in CY18.
The company’s earnings per share increased to Rs13.4 in CY19 against Rs11.3 in the same period in CY18.
Along with the result, company also announced final cash dividend of Rs3.25/share taking full year payout to Rs10.8/share against Rs8.9/share, in 2018.
Higher earnings in CY19 were on the back of increase in gross margins by 2.6ppt mainly due to better product prices of urea (21 percent) and Dap (10 percent), and 14 percent year-on-year higher other income amid higher interest earned on GIDC accumulation and higher dividend income from subsidiaries and associates, Saqib Hussain Khan, at Sherman Securities said.
However, finance cost of the company remained higher by 51 percent on the back of higher borrowings along with increased interest rates, he added. Furthermore, increase in other expense by 62 percent also affected the bottom line.
In the fourth quarter of CY19 alone, EPS of the company clocked in at Rs3.6, down 21 percent on year-on-year basis. Major reason behind lower earning was decline in urea and DAP off-take by 9 percent, higher finance cost by 81 percent and increase in other expenses by 54pc, he added.
Copyright Business Recorder, 2020
TETRA PAK PACKAGING MATERIAL FACTORY LAHORE RECEIVES TOP AWARD
By RECORDER REPORT on February 1, 2020
Tetra Pak’s packaging material factory in Lahore has received the world’s top award for manufacturing excellence. In doing so, it becomes the 24th factory worldwide to win the prestigious award. Appraised by the Japan Institute of Plant Maintenance, the World Class Total Production Maintenance (TPM) Award is presented to facilities that have achieved outstanding levels of production quality, reliability, efficiency and environmental performance.
“This Award is a tremendous recognition for the hard work, dedication and focus of our Lahore team. The stringent assessment process covers the entire operation from the shop floor to the executive boardroom. The award can only be achieved by firms demonstrating a true company-wide commitment to production distinction,” said Jorge Montero, MD Tetra Pak Pakistan.
Reiterating the significance of the award, Mansoor Zaman, Factory Director Pakistan stated: “This is the first factory in Pakistan to reach this level of manufacturing excellence. We are extremely proud to establish world class standards in the country which not only enhances the confidence of our customers to work with a reliable partner but also identifies the potential of our employees to match the highest level of professionalism which can exist in the world.”
This is the third time in four years that a Tetra Pak facility has received this award, following the 2016 and 2018 successes of its Gornji Milanovac factory in Serbia and the Izmir Factory in Turkey.
Copyright Business Recorder, 2020
NEWS COVERAGE PERIOD FROM JAN 20 TO JAN 26, 2020
DON’T EXPECT UNIFORM CUT, FERTILISER MAKERS WARN GOVT AFTER GIDC WAIVER
Nasir Jamal Updated January 22, 2020
LAHORE: The government’s efforts for an across-the-board reduction in urea prices could face resistance from some manufacturers as the impact of cuts in Gas Infrastructure Development Cess (GIDC) on industry’s cost of production will vary from company to company.
The Economic Coordination Committee (ECC) on Monday slashed the GIDC on fertiliser sector by almost 99 per cent ie from Rs405 a bag to Rs5 with a view of providing relief to farmers reeling under spiking input costs.
The government expects all manufacturers to uniformly revise their prices down by Rs400 per bag after the GIDC cut.
However, a senior Engro Fertiliser executive told Dawn that they would not be able to meet government’s expectations.
“We surely will fully pass on the projected reduction in our cost to farmers but you shouldn’t expect us to pay the subsidy from our pockets,” he said on the condition of anonymity.
The urea prices in the last year alone have increased from an average of Rs1,600 per bag to about Rs2,000, according to a BMA Capital analyst.
The industry sources said the price had risen from Rs1,800-1,850 level owing to increase in gas tariffs announced during the year.
Analyst Yusuf Rahman told Dawn on Tuesday that reduction in the GIDC would decrease cost of urea producers from Rs412 a bag to Rs38. But the impact varies from firm to firm due to three different types of feed gas tariffs.
Yusuf said the plants on concessionary feed gas had in the past shown much higher earnings than rest of the industry on account of concessionary gas rates and GIDC waiver.
He was of the view the uniform price reduction of Rs400 per bag will severely affect their earnings in 2020.
The fuel gas, however, is provided at the same rate of Rs150/mmBtu.
The GIDC reduction for companies like Fauji Fertiliser getting feed gas at Rs300/mmBtu will help lower their cost by Rs412 per bag as they have accrued the entire levy in their cost.
But the reduction in cost of firms like Engro (new plant) and Fatima receiving feed gas at a concessionary rate of $0.70/mmBtu (for initial 10 years of their life) is projected to be around Rs38 a bag.
Both these plants attract GIDC only on fuel gas whereas feed gas supplied to them is exempt from payment of levy under a court decision.
The manufacturing cost of Engro’s (old) plant is projected to decline by Rs90 per bag since it pays feed gas tariff of Rs1,021/mmBtu for 70pc of its total consumption and Rs300/mmBtu for the remainder 30pc gas.
Engro and Fatima had approached government prior to the ECC meeting with a proposal to increase feed gas price to Rs635/mmBtu to make up for the “loss” in GIDC revenue but leave urea rates unchanged. The proposal was rejected.
“The urea off-take had hit a new monthly record of 1.4 million tonnes, pushing total sales in 2019 to 6.3m against the five-year annual average of 5.7m, despite the fact that it was being sold for Rs2,040.
“This indicates that farmers have the financial muscle to buy fertiliser at the current prices,” a Fatima Fertilizer executive told Dawn.
He also chose to stay anonymous but added gas companies could have raised additional revenue of up to Rs48 billion if government accepted the proposal.
Published in Dawn, January 22nd, 2020
FERTILISER SECTOR OPPOSES RAISE IN GAS TARIFF
By ZAHID BAIG on January 24, 2020
Rumours of increasing gas tariff for the fertilizer sector may hamper the government efforts to pass on a decrease of Rs400 per bag of urea to the farming community after curtailing Gas Infrastructure Development Cess (GIDC).
“The uncertainty may disrupt the availability of fertilizers and lead to another crisis of like wheat,” said sources in the fertilizer industry here on Thursday and added that the decision of increasing gas prices has received mix reactions from the manufacturers.
The industry has divergent views on the issue as new plants are exempted as per their legal stance in the court cases. However, industry is unanimous on its inability to pass through the impact of GIDC, and industry is constrained to pass on the impact of gas increase, to the consumers, if it follows. While Fauji with old plants has welcomed the decision, as it would reduce their cost of production substantially, Engro is not happy as GIDC is illegal to their understanding and will affect their bottom line. There are strong rumours that summary on the gas price revision will be considered in the upcoming ECC meeting.
The proposal by Ministry of Petroleum recommended providing gas under fuel head at the price of LNG (Rs1,672 per MMBTU in December). This is driven by the urge of Gas Companies for higher revenue generation and providing level playing field to all players, while reducing burden on farmers. This becomes a hanging sword in the form of price increase Rs200 per bag. Such a move immediately after reduction of Rs400 per bag through GIDC revision is politically incorrect.
It is feared that this indecisive position of the Government and market uncertainty may lead to disruption of supply chain. The farmer is waiting for reduction of price by Rs400 per bag, while dealers holding inventory procured at Rs1,980 desired to liquidate their inventory before new price come into effect. The manufacturers would like to sell what they manufacture before new prices are applied, however, dealers are found reluctant to book at the present prices to avoid losses in the short term. The reluctance of farmer may lead to delayed application of Urea and damaging the wheat crop.
If the Government further withholds the decision on gas prices, there is likelihood of severe shortage in the market in spite of adequate domestic production. As price adjustment is effected post GIDC reduction, the farmers would go for panic buying in view of fear of price increase due to gas prices, while dealer would be reluctant to sell for the same reason to mitigate their losses.
Manufacturers will also be in fix due to mixed market sentiments. Therefore, the government, instead of point scoring through GIDC reduction and later shifting the blame on manufacturers, should act prudently and combine both factors, thus offering a reasonable package to the farmers. This will ensure least disruption of supply chain and avoid a crisis that seems to be in the offing, the sources suggested.
The Fertilizer Manufacturers of Pakistan’s Advisory Council (FMPAC) commenting on this situation said delay in decision making is highly disturbing for the industry manufacturing at present very high cost of production, while substantial price reduction is in the offing.
Copyright Business Recorder, 2020
YEAR-ON-YEAR UREA PRODUCTION IN PAKISTAN SURGES 10% IN 2019
By Our Correspondent Published: January 26, 2020
ISLAMABAD: Domestic companies managed to achieve urea production of 6.17 million tons in 2019. According to the figures released by the National Fertiliser Development Centre (NFDC) on Thursday, the production was 10% higher compared to 5.6 million tons produced in 2018.
Domestic production of the commodity increased due to better gas availability to the sector and the Pakistan Tehreek-e-Insaf government’s decision to revive closed urea plants by providing them RLNG at subsidised rate in order to facilitate farmers.
“Urea sales were expected to be on higher side due to shift in crop cycle and lower inventory carried by dealers this time,” said Foundation Securities research analyst Usman Arif.
“Improved gas availability due to lower demand from power plants resulted in better gas supply to Engro Fertilizer from Mari gas fields which produced additional 0.2 million tons of urea in 2019.”
Fertiliser prices during 2019 increased by 12% partly due to government’s decision to hike gas prices for fertiliser feed/fuel gas by 62/31% in July 2019 to meet IMF pre-conditions.
Published in The Express Tribune, January 26th, 2020.
NEWS COVERAGE PERIOD FROM JAN 13 TO JAN 19, 2020
UREA OFFTAKE JUMPS TO 6.2 MILLION TONS IN CY2019
By RIZWAN BHATTI on January 15, 2020
Urea offtake surged to some 6.2 million tons during the last year (CY2019) supported by attractive wheat support price.
According to industry sources, overall urea offtake clocked-in at 6.19 million tons during 2019 compared to some 5.8 million tons in 2018, showing an increase of some 6.8 percent.
Urea sales also witnessed a phenomenal jump of 84 percent to 1.307 million tons during December 2019 against some 0.7 million tons in December 2018. The massive surge in December 2019 was due to lower sales during October and November 2019 as growers were expecting some reduction in urea prices.
Industry sources say this is the highest-ever monthly urea offtake and with record urea sales during last month, overall carryover stocks of urea have also reached below 0.2 million tons in the first week of January 2020.
Last year, the government resumed gas supply to two fertilizer plants, ie, Agritech and Fatima Fertilizer. These plants were operating on imported RLNG. These two plants cumulatively produced some 0.8 million during 2019 and help to avert the shortage in the domestic market.
The supply of RLNG and production of these two plants not only averted shortfall of urea in domestic market during 2019, the country’s fertilizer industry was also able to produce highest-ever 6.2 million tons urea, sources said.
They said that the Fertilizer Review Committee in its recent meeting has also acknowledged that gas supply to these two plants has helped avoid urea shortage in the domestic market during last year.
The government provided gas to two fertilizer companies operating on the SNGPL network at USD 6.5/MMBTU during 2019, which was 47 percent higher than the weighted average industry rate for fertilizer feed and fuel gas.
These two manufacturers sold urea at the prevalent local price of Rs 2,040 per bag, which was 25 percent less than the landed cost of imported urea. Moreover, distribution of urea by local manufacturers remains more efficient.
As per industry estimates, the urea demand in 2020 is expected at 6.1 million tons while production (excluding two RLNG-based fertilizer manufacturers) will be around 5.4 million to 5.5 million tons.
There is need that the government should operate both the fertilizer plants for at least 10 months to bridge the expected shortfall of 0.6 million tons of urea in 2020 and save the prestigious foreign exchange reserves, they maintained.
Copyright Business Recorder, 2020
NEWS COVERAGE PERIOD FROM JAN 06 TO JAN 12
CHEMCHINA, SINOCHEM MERGE AGRICULTURAL ASSETS
By RECORDER REPORT on January 6, 2020
ChemChina and Sinochem are consolidating their agricultural assets into a new holding company to be called Syngenta Group, ChemChina unit Syngenta said on Sunday. Chen Lichtenstein, current president and CEO of Shenzhen-listed crop protection company ADAMA, which will also be incorporated into the new group, will be nominated CFO of the newly formed Syngenta Group.
He will be based in Basel, Switzerland, the Swiss group said in a statement. Reuters reported last month that China National Chemical Corp, or ChemChina, had approached Chinese state-backed investors for up to $10 billion in funding as part of a reorganisation of its agrichemicals business ahead of a public float.
The reorganisation includes Syngenta, the Swiss pesticide producer that ChemChina agreed in 2016 to buy for $43 billion. The fundraising efforts and eventual stock market listing are designed to cut ChemChina’s debt ahead of a long-awaited mega-merger with state-owned peer Sinochem.
Frank Ning, the chairman of both companies, has encouraged individual business units to tap capital markets ahead of any tie-up, which has been in the works since 2016. ChemChina wants to list Syngenta on China’s technology-focused STAR market in mid-2020, according to fundraising documents dated from October.
Copyright Reuters, 2020
TRACTOR SALES PLUNGE 40PC
Aamir Shafaat Khan Updated January 10, 2020
Manufacturers have urged the government to withdraw new taxes on the industry to boost tractor sales.
KARACHI: Owing to persistent depressed demand the tractor sales plunged to 15,200 units during the first half year of 2019-20 from 38,000 units in the same period last year.
In recent years the tractor manufacturers have been facing sharp decline in demand mainly due to poor performance of the agriculture sector especially failure of cotton and some other cash crops. The country’s total tractor sales had fallen to 50,405 units in FY19 from 70,887 units in the preceding year.
Sales of Al Ghazi Tractors Ltd (AGTL) stood at 5,881 units in IHFY20 as compared to 17,993 in FY19 and 27,839 units in FY18.
Referring to these sales figures as ‘alarming’ while commenting on workers’ layoffs, CEO AGTL Mohammad Shahid Hussain said, “We have scaled down our outsource workforce but have kept permanent employees.”
Without sharing exact numbers, he said the company has significant unsold tractors.
AGTL’s plant had undergone maintenance from Dec 19, 2019 to Jan 6.
Shahid said numerous factors are contributing to the massive downturn including the current economic situation, falling farm yield, crop prices, inflation and high borrowing rates.
“The backbone of the tractor industry is its 200 plus vendors who employ over 10,000 skilled and unskilled workers. In this situation, they are about to collapse owing to either no or extremely low ordering levels from the tractor industry,” he said. “We are in no position of providing them any hopes of short-term improvement owing to uncertainty.”
He urged the government to take note of the situation and provide some relief and breathing space to the industry for partial revival.
In a situation where the industry’s profitability has shrunk visibly coupled with depressed affordability of the farmers (end users), the government in July 2019 introduced an additional sales tax and enhanced customs duty on the imports of CKD components being imported by auto manufacturers including tractor assemblers.
He asked the government to withdraw the new levies to revive sales of tractors. “The government should consider that tractor sales are primarily agri-based and should not be treated or clubbed together with any other segment of the economy.”
The government should also consider mobilising Zarai Taraqiati Bank Ltd to dole out tractor loans to farmers at half the prevailing interest rates, he proposed.
Published in Dawn, January 10th, 2020
INFANT FORMULA PRODUCT COMPANY KICKS OFF LOCAL PRODUCTION
By Our Correspondent Published: January 11, 2020
KARACHI: People in Pakistan are likely to get Morinaga Milk products at relatively cheaper prices as the company has begun local production.
NutriCo Morinaga Private Limited, a subsidiary of ICI Pakistan Limited, has commenced commercial production of infant formula products with an investment of over Rs5 million, stated a notice sent by the company to the Pakistan Stock Exchange (PSX) on Friday.
“ICI Pakistan Limited is pleased to announce that effective from January 10, 2020, NutriCo Morinaga has commenced commercial operations of Morinaga infant and growing up formula products at its manufacturing facility in Sheikhupura, Punjab,” said the notification.
The facility possesses the capacity to produce 12,000 tonnes of the formula products per year.
NutriCo Morinaga, which was inaugurated on September 20, 2019, is a joint venture of ICI Pakistan, Morinaga Milk Japan and Unibrands Private Limited. The joint venture has invested Rs5.5 billion in the project.
“There has been no remarkable development in the food sector lately, instead the food companies are struggling badly on account of taxation,” said Next Capital MD Muzammil Aslam. “A year and a half ago, National Foods was active but it is not the case anymore.”
He added that ICI Pakistan was a hybrid company operating in different subfields of the food sector including agricultural feed, pharmaceutical products and animal vaccination, which was why it showed signs of growth during a period of economic slowdown.
He added that Morinaga’s local product would be a substitute for the company’s imported infant formula product, which was being imported into Pakistan for a long time.
“This will be a relatively cheaper product, which will be affordable by the common man,” he said, adding that the imported product was well out of the common man’s reach.
He said the company may cut down nutrition in the locally produced product to some extent to curb the cost to a point where the common Pakistani could afford it.
Following the notice of commencement of local production, ICI Pakistan got a positive response from investors and its stock price closed at the upper lock.
Published in The Express Tribune, January 11th, 2020.
NEWS COVERAGE PERIOD FROM DEC 30 JAN 05,2020
SHC ORDERS ACTION AGAINST SUGAR MILLS DEFAULTING ON GROWERS’ DUES
The Newspaper’s Staff Reporter November 20, 2019
KARACHI: The Sindh High Court on Tuesday directed the cane commissioner to ensure payment of all outstanding dues of sugar cane growers and take action against defaulting sugar mills.
Hearing a set of petitions, the two-judge bench headed by Justice Mohammad Ali Mazhar observed that the cane commissioner had been provided various opportunities but the dues outstanding against millers remained unpaid.
The bench asked the cane commissioner to take legal action against defaulting sugar mills in accordance with the Sugar Factories Control Act, 1950.
The cane commissioner submitted a report about the payments made by different sugar mills upon which a representative of growers said that the mode of payment was not mentioned in the report.
Putting off the matter till Dec 19, the bench directed the cane commissioner to submit a report at the next hearing with regard to the mode of payment and the number of cases filed by him against defaulting sugar mills.
The Sindh Growers’ Alliance (SGA) and others had moved the court stating that hundreds of applications regarding non-payment of growers’ dues by sugar mills were still pending action by the cane commissioner.
Published in Dawn, November 20th, 2019
NESTLE WRAPS UP $20.7BN SHARE BUYBACK
Reuters December 31, 2019
ZURICH: Swiss food giant Nestle said on Monday it had completed a 20 billion Swiss franc ($20.7bn) share buyback program and reiterated plans for a new one up to the same amount starting next year.
Since July 4, 2017, Nestle said it had repurchased 225,186,059 of its shares at an average price per share of 88.82 Swiss francs.
“Nestle will start a new share buyback program of up to CHF 20 billion as announced on Oct 17,” the company said in a statement.
“Nestle plans to commence repurchases on or after Jan 3, 2020. The new share buyback program shall be completed by the end of December 2022.”
Published in Dawn, December 31st, 2019
KBP PLANS PROTEST AGAINST CLOSURE OF SUGAR MILLS
By RECORDER REPORT on January 1, 2020
The Kissan Board Pakistan (KBP) has announced to protest against closure of sugar mills saying it has posed serious threats to farmers and sugarcane crop as well. The KBP alleged that the sugar mills mafia is not interested in buying cane on government rates and blackmailing the growers. This was announced by KBP Central President Chaudhry Nisar Ahmad and Secretary General Chaudhry Shaukat Ali Chaddhar while talking to a delegation of the sugarcane growers.
They said the government was also being blackmailed by the sugar mills as big wigs of Pakistan Tehrik-e-Insaaf are part of this mafia.
Copyright Business Recorder, 2019
GOVT SAVES $250M WITH RESUMPTION OF GAS SUPPLY TO TWO FERTILISER PLANTS
RIZWAN BHATTI January 03, 2020
KARACHI: The government’s decision to resume gas supply to two closed fertiliser plants resulted in saving of precious foreign exchange amounted to approximately $250 million, besides sufficient urea supply in the domestic market during last year.
Industry sources told Business Recorder on Thursday, that Pakistan has an installed production capacity of some 6.8 million tonnes urea annually, however, in the past fertiliser plants were unable to produce the sufficient commodity due to gas curtailment and government was compelled to spend millions of dollar of precious foreign exchange to import urea for domestic consumption. In addition, government also paid billions of rupees of subsidy on imported urea to keep the prices lower.
In September 2018, with concrete efforts of Abdul Razak Dawood, Advisor to Prime Minister, gas supply was resumed to two closed fertilizer plants i.e. Agritech and Fatima Fertiliser. With restoration of gas supply these two plants have successfully produce some one million tonnes of urea for local consumption during the last year. The government’s decision also eliminated the need of urea import and saved the national kitty’s precious foreign exchange.
Urea sales witnessed a phenomenal jump of 84 percent (YoY) to the highest monthly urea offtake of 1.307 million tonnes during December 2019. On a yearly basis, urea offtake clocked in at 6.2 million tonnes during 2019 that is 2nd highest yearly offtake after 2009. After record offtake in December 2019, urea stock has fell down to 0.2-0.25 million tonnes.
Industry sources said that the increase in urea offtake was because of tonne increase in wheat support price by the federal government and higher wheat market prices giving favourable economic outlook of major Rabi crop.
Pakistan’s domestic demand of 6.2 million tonnes urea during 2019 was also comfortably met by local producers owing to prudent and timely government policies particularly gas supply to closed plants.
Despite massive and higher offtake in December, constant urea supply was possible due to continuous running of urea plants especially closed plants on SNGPL, Agritech and Fatima Fertiliser.
These two plants got gas from September 2018 to November 2019 and contributed some 0.8 million tonnes urea in 2019 and without their production a shortage of urea was inevitable. The federal government’s decision has successfully saved foreign exchange amounted to $250 million as timely gas supply has avoided import of urea, they informed.
Advisor to Prime Minister Abdul Razak Dawood pursued these plants operations which also resulted in fertiliser being one of only sector showed 15 percent growth in Large Scale Manufacturing sector.
Industry sources said that massive urea offtake will set the foundation for the growth of Pakistan’s agricultural sector ensuring not just its own food security but also paving the way for Pakistan to become a food basket for countries in the region. The growth in urea sales also indicates the trust of the farmers in the sector and the government, they added.
Fertiliser Manufacturers of Pakistan Advisory Council (FMPAC) and National Fertiliser Development Centre (NFDC) estimated urea demand of 6.2 to 6.3 million tonnes during 2020 with likely shortage of around 0.6 million tonnes, if gas supply to two plants will not be restored.
Industry sources said that two closed plants Agritech and Fatima Fertiliser, having combined capacity of 1 million tonne, can produce some 0.8 million to meet the estimated urea shortages in 2020 saving precious Foreign exchange of around $225 to $250 million.
PASSAGE OF TAX ORDINANCE: FERTILISER INDUSTRY FEARS DISRUPTION IN SUPPLY
By ZAHID BAIG on January 4, 2020
Fertilizer industry fears disruption in fertilizer supply owing to the recent passage of Tax Ordinance by the federal government which restricts fertilizer companies from claiming input sales tax on retailing of urea to unregistered dealers.
This overnight knee jerk action by the government has very serious implications for the industry and the farmers as 99% of urea dealers are not registered in FBR, industry circles claimed.
The law reads, “A registered manufacturer shall make all taxable supplies to a person who has obtained registration under this Act …… failing which the supplier shall not be entitled to claim credit adjustment or deduction of input tax as attributable to such excess supplies to unregistered person”.
While the intent of the law is appreciated, it has serious business implications, feared fertilizer industry circles. The supply chain of fertilizer across the Country would be disrupted badly since registration of existing dealers’ network or induction of new dealers is expected to take considerable time. The loss on account of inability to claim the refund / adjustment on the attributable input sales tax on supplies to the unregistered dealers may lead to uncalled for price hike leading to incremental burden on farmers that is not the desire of industry or Govt. Industry wide impact is expected into billions of rupees per annum. In the middle of Rabi season, any disruption of supply of Urea will have serious implications for the wheat crop and endanger the national food security.
On the edge of government policies, the fertilizer industry is already facing the input and output GST imbalance and this new ordinance, which has been enforced without addressing the legitimate concerns of the fertilizers companies, will lead to losses in billions.
Describing the issue, sources in fertilizer industry disclosed that they pay GST to government in various ways, such as in feed stock gas 5% GST is applicable and on fuel stock gas, the fertilizer manufacturer is paying 17% GST and on account of other input taxes industry is paying 17 percent GST, while the output GST is collected at 2%.
In simple terms, a fertilizer manufacturer is paying 125 rupees as input GST and collects 40 rupees as in output GST, thus 85 rupees refund to the fertilizer manufacturer per bag. As per the new ordinance fertilizer companies would not be able to claim the 85 rupees to government because 99% urea dealers are not GST registered, which costs the industry in a loss of 10 billion rupees. Furthermore, at this stage the government is already liable to pay 29 billion rupees of fertilizers manufacturers on account of previous sales tax adjustments.
Executive Director of Fertilizer Manufacturer of Pakistan Advisory Council (FMPAC) Brig Sher Shah (Retd) reacting on the situation said, “Contrary to the government’s claim of promoting ‘ease of doing business,’ this Ordinance may have serious implications on the fertilizer industry as well as the farmers, as the entire supply chain is feared to be disrupted since registration of the existing dealers is expected to take considerable time.”
Therefore, FBR has been requested to allow reasonable time to targeted dealers for registration, he further added in his statement.
Copyright Business Recorder, 2020