Competition Commission of Pakistan claims urea price hike as unjustified – Alfalah Securities Limited

Karachi, June 27, 2012 (PPI-OT): According to newspaper sources, the Competition Commission of Pakistan (CCP) has termed an 85.88% increase in urea prices from PkR 850/50-kg bag in December 2010 to PkR 1,580/50-kg bag in October 2011 as unjustified and has blamed two major groups of fertilizer producers having around 84% of the total industry capacity to have used their market dominance in order to reap higher profits.

According to Alfalah Securities Limited, CCP may also initiate proceeding against urea producers for making unreasonable and unjustified increase in urea prices. CCP has also claimed that the government’s inability to control urea prices have provided an opportunity to producers to raise urea prices persistently.

CCP informed that when asked from producers about an exorbitant increase in urea prices, they blamed prolonged and uninformed gas curtailment by the government and imposition of GST on urea to be the major culprit. According to CCP, Gas Curtailment has affected plants having only 27% of the total industry capacity while the remaining 73% have no sufficient justification for the above stated price hike. The input cost mainly comprising of feedstock gas cost and other components had remained unchanged in 2011 when compared with the previous years hence, these factors also fail to justify an increase in urea prices. Furthermore, it claimed that if gas curtailment has resulted in production losses for manufacturers to a considerable extent then their profitability would have shown a bleak picture however, the reality is quite opposite. Alfalah Securities Limited believes that the fertilizer manufacturers may face penalties in response to CCP’s decision to initiate proceedings against these manufacturers.

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