Balochistan and Sindh seem to be reluctant to share subsidy on urea import, made to meet demand of farmers for cultivation of different crops.

According to sources, Balochistan has refused to share the burden of urea subsidy whereas Sindh has not yet responded to the federal government’s request.

Though the two other provinces, Punjab and Khyber-Pakhtunkhwa (K-P), agreed to dole out subsidy, they have not provided any funding so far.

The federal government had brought urea from overseas markets with a plan under which provinces had to bear 50% subsidy burden. However, hesitation on the part of provinces forced the Centre to approve billions of rupees in supplementary grants to clear subsidy bills.

In a recent meeting, the Ministry of Commerce told the Economic Coordination Committee (ECC) that the Trading Corporation of Pakistan (TCP) had imported 100,000 tons of urea from China in line with the cabinet’s decision made on January 11, 2022. Then the imported urea was distributed to provincial governments through National Fertiliser Marketing Limited (NFML).

According to an understanding reached in the cabinet in February 2022, the subsidy on imported urea would be shared equally, ie, 50% to be borne by provinces while the remaining 50% by the federal government.

As TCP had purchased urea with the help of loans taken from commercial banks based on the cash credit limit approved by the Finance Division, the mark-up on financing was being charged continuously. The total amount of subsidy payable by the federal government, including mark-up up to April 30, 2023, was calculated at Rs5.36 billion. By the end of June, it would rise to Rs5.57 billion.

It was revealed in the ECC meeting that Rs6 billion was available with the Finance Division under demand no 45 for payment of subsidy on the import of urea fertiliser. The Ministry of Commerce submitted some proposals for consideration and approval by the ECC.

It proposed that a technical supplementary grant of Rs5.57 billion may be released for the Ministry of Commerce, being the administrative division of TCP, under demand no 45 for the current financial year, as there would be a time lag between the approval of the grant and the release of funds for TCP.

“Any excess funds given to TCP will be deposited by the corporation in the government exchequer,” it gave assurance to the ECC. The commerce ministry proposed that the Ministry of Industries and Production may be advised to ensure early payment of urea subsidy by the provinces.

The ECC was informed that the Finance Division had agreed on the technical supplementary grant. The Ministry of Industries informed the meeting that the governments of Punjab and K-P had agreed to share urea subsidy with a 50:50 ratio but no funds had been released by them so far.

Moreover, it said, the government of Balochistan declined to bear 50% subsidy cost while Sindh did not give any response.

The ECC considered a summary submitted by the Ministry of Commerce titled “Sharing subsidy on imported urea on 50:50 basis – technical supplementary grant for Ministry of Commerce” and approved the proposals.

Published in The Express Tribune, May 28th, 2023.

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