An increase of one billion and eighty crore rupees in the profits of the factories in the Rabi season alone
Islamabad: Two major fertilizer factories of the country have been revealed to be involved in price fixing.
Competition Commission of Pakistan (CCP) on completion of inquiry has recommended initiation of action under Section 30 of Competition Act against Urea Manufacturers and Fertilizer Manufacturers of Pakistan Advisory Council (FMPAC).
According to the CCP inquiry team, urea manufacturers and FMPAC have violated section four of the Competition Act (i.e. Prohibited Agreements) by announcing to fix the maximum retail price of 50 kg bag of urea at Rs.1768. ) were found guilty of violation
The inquiry was initiated after the FMPAC and its members issued an advertisement on November 26, 2021 announcing the maximum retail price of urea at a time when there was a shortage of urea in the country and the prices had gone up. were
As per the Fertilizer Policy of 2001, urea prices were deregulated and concerned provincial agriculture departments kept notifying the prices of urea at various times as it is considered as an essential commodity.
This pre-fixed price by the companies is notified by the Agriculture Department to be used as a reference to prevent profiteering.
The inquiry noted that companies issue their own price lists which are then notified by the Deputy Director of Agriculture.
The inquiry committee got the price list of 22 districts for the year 2021 and 2022 by contacting the Agriculture Department, Punjab Government.
The inquiry revealed that the coprice pattern of various fertilizer manufacturers in the urea industry shows strikingly parallel pricing and points to a possible cartel in the industry.
Especially, the prices of FFC, Engro, Fatima Fertilizer, Agritech continued to fluctuate during this period.
According to the inquiry report, the advertisement issued by FMPAC and its members refers to the decision taken by the association in which the sale price of urea fertilizer is specified.
It was also observed that this announced price was also implemented by the urea companies raising concerns whether it was just a coincidence or an act of manipulation. The urea sector in Pakistan consists of six companies respectively. FFC, Engro, Fatima Fertilizers, Agritech have a large share of the market.
The difference in cost structure provided by government to urea producers with subsidized feedstock gas and such uniformity in prices despite subsidized gas raises various questions.
Pakistan’s agriculture sector accounts for 22.7% of GDP and is highly dependent on sector fertilizers.
The increase in current prices by FMPAC and its members has seen their profits increase by Rs.1 billion and eighty crore in the Rabi season alone.
Major fertilizer companies such as FFC, Engro and Fatima saw a marked increase in their profits for the year 2021. These companies benefited from it, but the farmers and consumers continued to suffer.
In spite of subsidized gas in this sector, this increase in prices raises questions on transparency.
The advertisement issued by FMPAC and its members in which they jointly announced the price of urea in the relevant market appears to be a decision under the Competition Act which is, in retrospect, a section of the Competition Act. 4 is a violation.
From the point of view of competition law, price fixing is a purely commercial decision and such a decision by an association is a clear violation of the competition law. Associations should not engage in any activity that affects competition in the market.
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