The Pakistani market has been divided following the increase of a tax whose proceeds are used to develop natural gas infrastructure. Some local urea manufacturers suffer, while the importers benefit from the change.
Prices must rise as well
Following long negotiations, the Pakistani government obtained the permission from the Supreme Court to raise Gas Infrastructure Development Cess (GIDC), an excise tax which is collected to finance the construction of the domestic part of the gas pipeline connecting Pakistan and Iran. Once the tax increase came into force, the local urea manufacturers were faced with a 10% increase of the manufacturing cost.
Was there any alternative?
The current situation is the most favorable for urea importers, who benefit from government subsidies, but resell at a market price. Therefore, the Pakistani fertilizer manufacturers have appealed to the government both to stop GIDC increases, and to decrease the budget subsidies for the imported urea. This would result in the intensification of domestic production of this fertilizer, thus boosting the revenue of the Pakistani treasury.