Ministry of Industries and Production announced Fertilizer Policy 2001. NFDC supplied required information and technical support in the formulation of this policy. For the information of national and foreign investors, policy planners and general user this policy in toto is posted on NFDC website.FERTILIZER POLICY 2001
Whereas the Fertilizer Policy announced by the Government of Pakistan in 1989 was successful, assuring reasonable prices of fertilizer to farmers below import price and in bringing substantive investment to enhance domestic production and has completed its stipulated time frame, and whereas it is felt that further investment in fertilizer production is required keeping in view the importance of fertilizers in increasing the country’s agricultural output, a need is felt to review and update the policy to encourage new and existing investors to come forward to invest. Accordingly, the following policy is adopted, after due authorization by the Cabinet, with effect from 1st July, 2001:
1. EXISTING PLANTS
1.1. a) To enable local fertilizer price to stay below imported fertilizer prices, the escalation of existing feed gas prices will be as follows:
Date Annual Increase%
b) Therefore, the price is to be $1.10/MMBTU or prevailing
c) Fuel gas price will be the same as for other industrial consumers in the country. Fuel gas will continue to be defined as gas which is used for generation of electricity and steam and for usage in housing colonies.
d) Concessional feed gas allowed under the 1989 Fertilizer Policy to companies that undertook expansion will be continued until their 10 year period is exhausted. Thereafter the feed gas price will be same as in 1.1(a) and (b).
2. NEW INVESTMENT
2.1 NATURAL GAS
2.1.1 It is the intent of this policy to provide investors in new fertilizer plants in Pakistan a gas price that enables them to compete in the domestic market with fertilizer exporters of the Middle East so that indigenous production is able to support the agricultural sector’s requirement by fulfilling fertilizer demand.
2.1.2 The price of feed gas will be the Middle
Eastern Price prevailing on the date of signing of the GSA or $0.77/MMBTU which
ever is higher (less the discount of 10% mentioned in 2.1.3) and shall remain
fixed at such price till the expiry of 10 years from the date of commissioning. The
price will be determined by the Gas Regulatory Authority of Pakistan, from the
published international data, in dollar terms, on the principle of general parity
with the price prevailing in
2.1.3 A discount of 10% will be allowed on such determined price as at 2.1.2 to facilitate new investment. The discount price i.e. the price fixed as per 2.1.2 and 2.1.3 will remain fixed, for a period of 10 years from the date of commissioning, in dollar terms. The rupee parity will be determined as defined in para 2.1.6. This price will be inclusive of all taxes, duties, levies, fees and charges wheresoever, whether local, federal or provincial. However, GST or similar duty may be imposed on such determined price provided it is adjusted against GST, payable on the fertilizer produced.
2.1.4 The investor may avail this opportunity to sign GSA (Gas Sales Agreement) as detailed in 2.1.2 & 2.1.3 by 30th June, 2005.
2.1.5 Fuel gas prices shall continue to be treated as at par with other Industrial consumers.
2.1.6 For billing purposes, the price fixed in dollars will be calculated in Pak Rupees, at the average inter bank rate. The average inter bank rate shall be fixed twice in a year i.e. on 1st January, and 1st July, based on the average of the previous six months daily inter bank rate.
2.1.7 Gas Companies will build adequate safeguards in the
GSA to ensure that the investor proceeds without delay in installing the plant
2.1.8 Gas will be allocated to new fertilizer plants on
the principle of first come, first served. Recognizing the expected growth in
2.2 IMPORT AND LOCAL MANUFACTURE OF PLANTS
2.3 IMPORT OF SECOND HAND PLANT
2.3.1 Investors will be allowed to relocate second hand plant, equipment and machinery, with the same concession/exemption as applicable to new plants.
22.214.171.124 If an investor undertakes an expansion, major BMR or de-bottlenecking of an existing plant, which results in increase in the production capacity of the plant, such additional feed gas shall be treated at par with a new plant for 5 years for purposes of concessions/exemptions outlined in 2.1.2, 2.1.3, 2.1.4, 2.1.5 and 2.2.1, 2.2.2 and 2.3.
2.5 EQUAL TREATMENT
All the fertilizer producers, domestic and foreign, public and private will be treated equally in commercial, fiscal, corporate and contractual matters.
3. PHOSPHATIC FERTILIZER
3.1 Considering the importance of Phosphatic Fertilizer, the Government plans to continue to encourage its local production. For said purpose, the following measures shall be taken:
3.1.1 Rock phosphate and phosphoric acid importable by manufacturers of fertilizer shall remain importable free of custom duty.
4.1.1 All raw materials required for NPK production i.e. Di-Ammonia Phosphate (DAP), Mono-Ammonia Phosphate (MAP), Triple Supper Phosphate (TSP), MOP, SOP and micro nutrients are allowed to be imported free of duties & taxes.
4.1.2 Import and local manufacture of plant, equipment
and machinery shall be treated as per Section 2.2.1 for concession and exemptions.
4.1.2 Import and local manufacture of plant, equipment and machinery shall be treated as per Section 2.2.1 for concession and exemptions.
5.1 Selling price of fertilizer shall remain deregulated on the understanding that while manufacturers will allow free market forces to prevail they will pass the benefits in the form of lower price of fertilizer to the farmers. In order to ensure this objective is achieved a Committee will be set up and shall meet as and when required, but at least on a regular quarterly basis and take appropriate steps as necessary. The Committee will be headed by the Minister for Industries & Production and will include Minister Food, Agriculture, Livestock as well as a senior representative from the Ministry of Finance.
5.2 Withholding tax collected at the time of import of fertilizer, shall be adjusted against assessed income tax of the year during which such import takes place, in case the fertilizer is imported by a manufacturer of fertilizer.