KARACHI: According to law no any association would be engaged in activities that have an adverse effect on competition. As prices of urea fertilizer are deregulated, associations and urea manufacturers have committed prima facie violation of Section 4(2)(a) of Act. They are collectively fixing price of urea instead of independently intimating their respective prices to government, which goes against fair competition principles.

Pakistan’s agriculture sector, contributing 22.7 percent to GDP, relies heavily on fertilizers with an average usage of 207 kg per hectare. Recent price hikes by FMPAC and its members resulted in gains of Rs 1.8 billion during Rabi season. Major fertilizer companies like FFC, Engro and Fatima Fertilizer saw significant profits in 2021, except for Agritech. FFC’s profit before tax in 2021 was Rs 30.3 billion, Engro’s Rs 29.8 billion and Fatima Fertilizer Company Limited Rs 28.2 billion. However, these gains increased costs for farmers and consumers. Sector’s subsidised gas, costing Rs 156 billion, raised concerns about fairness.

An enquiry committee of Competition Commission of Pakistan (CCP) concluded and recommended initiation of proceeding under Section 30 of Competition Act, 2010 against urea manufacturers and Fertilizers Manufacturers of Pakistan Advisory Council. This enquiry recommendation is based on prima facie violation of Section 4 ‘Prohibited Agreements’ of Competition Act, 2010, by manufacturers and FMPAC by announcing ‘maximum retail price’ of urea at Rs 1,768 per 50 kg bag. Enquiry was initiated following an advertisement published by FMPAC and its members on November 26, 2021, announcing ‘maximum retail price of urea’ during period of rising urea prices and reported shortages.

According to Fertilizer Policy of 2001, urea prices were deregulated, and respective provincial agriculture departments notified urea prices from time to time as it is considered an essential item. These prices, as already fixed by companies, are notified by agriculture department to use as reference to check on any profiteering.

As per finding of enquiry report, pricing pattern of different fertilizer manufacturers in urea industry exhibit price parallelism (uniform pricing) pointing towards possible collusion in industry. Specifically, prices of Engro, FFC, Fatima, and Agritech show parallel movement, with minor differences between them. For instance, in Rawalpindi, between February 2021 and June 2022, prices increased by Rs 232 for Engro, Rs 233 for FFC and Fatima and Rs 230 for Agritech. Interestingly, all companies reduced their prices to Rs 1,850 in May 2022, only to increase them again to Rs 1,950 in June 2022. In Layyah district, from January 2021 to November 2021, Engro, FFC and Fatima (excluding Agritech) experienced an increase in prices by Rs 482 per bag or 27.26 percent between February 2022 and November 2022. These findings highlight trend of price similarity and common pricing practices within urea industry.

Enquiry concluded that advertisement by FMPAC and its members constituted prima facie decision by an association, specifying selling rate for urea fertilizer. Furthermore, it was observed that announced price was implemented by urea companies, raising concerns about whether this pricing consistency was coincidental or result of collusive/coordinated activities.

Published in The Daily National Courier, August, 28 2023

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