Imposed taxes affects naphtha-based urea units

Naphtha-based urea manufacturing units has affected as the govt. imposed many taxes on naphtha, it results into increase in product landed costs, as reported.

The Department of Fertilizer (DoF) proposal plan stated that for units whose production costs are higher than the new compensatory system, the average retention prices of naphtha-based units and fuel oil/LSHS units may be adopted as Long Run Average Cost (LRAC) price for urea coming from different sources.

The modified updated LRAC prices of Rs. 12,117 per tonne and Rs. 11,162 per tonne are equal to the weighted average retention prices for naphtha-based and fuel oil/LSHS -based units respectively. These LRAC prices will be given only to those units whose retention price exceeds the normal LRAC price. Whereas other units will get the normal LRAC price, whose existing retention price is less than the normal LRAC price for naphtha and fuel oil/LSHS-based units, as sources said.

This increase in the LRAC price over the calculated one will reduce the losses as normal LRACprices are taken into consideration. While the naphtha units will suffer a staggering Rs. 553 crore loss at the normal LRAC price of Rs. 11,140 per tonne, the losses will stand reduced to Rs. 159 crore if the LRAC price of Rs. 12,117 per tonne is adopted. For other purposes, the FDCR component will remain the same Rs. 4,737 per tonne for naphtha units and Rs.4.660 per tonne for fuel oil units, according to DoF unit.

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