The Fertilizer Companies of Pakistan Advisory Council (FMPAC) and six other prominent businesses have received show-cause notices from the Competition Commission of Pakistan (CCP) for allegedly fixing urea prices, which would be a prima facie violation of Section 4 of the Competition Act, 2010.
The price of urea is a major factor in the cost of other necessary food items. Any arbitrary price increase by fertilizer companies for urea has the potential to drive up costs for farmers and ultimately raise consumer prices.
FMPAC and its six member companies, Engro Fertilizers Limited, Fauji Fertilizer Company Limited, Fauji Fertilizer Bin Qasim Limited, Agritech Limited, and Fatimafert Limited, were found to be prima facie in violation of the Competition Law following the CCP’s investigation.
The investigation was started in response to an FMPAC advertisement from November 2021, which stated that the “Maximum Retail Price of Urea at Rs 1768 per 50kg bag” would take effect amid rising costs and rumored shortages.
What is 2001 Policy for Fertilizer Companies?
The Fertilizer Policy of 2001 deregulated urea prices, as the inquiry proceedings disclosed. The contents of the advertisement were interpreted as an association’s decision regarding the urea sale rate, which was against Section 4(2)(a) of the Act.
The investigation also discovered urea companies to be following a pattern of consistent pricing and price parallelism, which may indicate collusive behavior.
Even though these companies receive government-subsidized feedstock gas at varying rates depending on the plant, their prices occasionally displayed uniformity. This calls into question the subsidies they received and their cost structures.
Even when an association announces prices that are set by the government, doing so is viewed as a commercial decision that goes beyond what is allowed in terms of competition law. Business associations have received numerous directives from CCP to abstain from price fixing and other forms of collusive behavior.
The recent years have seen persistent double-digit food inflation in Pakistan, which highlights the knock-on effect of rising urea prices on the overall economy.
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