The federal government will stop subsidizing gas for the fertilizer industry. This decision meets a key demand from the International Monetary Fund (IMF). The federal cabinet discussed this change during a recent meeting
Financial Constraints and Subsidy Issues
The Petroleum Division explained the impact of gas subsidies. They said subsidized gas either burdens domestic consumers or requires government subsidies. The Ministry of Industries noted that farmers did not benefit from subsidized gas. Urea prices stayed high despite the subsidies. The Finance Division opposed continuing the subsidy due to financial constraints.
Direct Subsidies to Farmers
The Cabinet decided to charge fertilizer plants full gas prices. They will provide subsidies directly to farmers instead. The Petroleum Division will oversee the implementation of this decision. This move aims to correct price distortions and ensure farmers receive the benefits.
Fertilizer Companies’ Profits
Reports showed fertilizer companies making huge profits due to stable gas prices. Fauji Fertilizer Company’s profit after tax (PAT) will rise to Rs 33.165 billion in FY 2023-24 from Rs 20.410 billion. Similar profit increases are expected for other companies.
Tackling Profiteering and Smuggling
Former caretaker Minister Muhammad Ali proposed ending cheap gas and subsidies. He said they strain the fiscal deficit and allow undue profiteering. Subsidies were not reaching farmers but were absorbed by informal channels. This resulted in a Rs 30 billion loss in government revenue.
Crackdown on Hoarding and Smuggling
Chief of Army Staff General Syed Asim Munir called for a crackdown on hoarding and smuggling of urea. He urged provincial leaders to act against those hoarding fertilizers and selling them at high prices. This policy aims to ensure transparency and fairness for farmers.
The new policy will streamline subsidies, reduce fiscal burdens, and address inefficiencies in the fertilizer sector.
