In order to prepare for the 5% federal excise duty (FED) on the fertilizer industry that the government would implement in the Budget 2023–24, Fauji Fertilizer Company Limited (PSX: FFC) and Fauji Fertilizer Bin Qasim Limited (PSX: FFBL) have raised the price of urea.
Retail rates for urea have increased by Rs. 350 per bag as of July 1, 2023, and are currently Rs. 2,910 per bag. To reflect the impact of FED, FFBL increased its urea rate by Rs. 162 per bag, bringing prices to Rs. 3,212 per bag.
Reason To Increase Urea Price
The Deputy Head of Research at JS Global, Waqas Ghani said, “This price increase exceeds the necessary adjustment to account for the impact of Federal Excise Duty (FED) and is likely intended to cover the increase in gas prices announced earlier, although not explicitly for fertilizer companies on the Mari network”.
In order to pass along the effects of the recently enacted levy on imported DAP, FFC has also raised the price of DAP by Rs. 480 per bag. Prices for FFC DAP are currently Rs. 9,995 per bag, while those for FFBL DAP are Rs. 10,045 per bag.
Engro Fertilizers Limited (PSX: EFERT) is also anticipated to make a comparable announcement.
Due to affordability, this increase in fertilizer prices could destroy demand and reduce output. Since January 2021, fertilizer prices have more than doubled, and as previously noted, it is projected that this trend will continue.
The price increase and the general elimination of domestic subsidies may encourage smuggling and shift more power to the mafias controlling the urea market from down under.
To read our blog on “The cabinet approves the imports of urea and wheat,” click here.
