Islamabad, July 12, 2023 – The Competition Commission of Pakistan (CCP) has uncovered evidence of price manipulation by fertilizer companies, resulting in substantial profits at the expense of farmers and consumers.
Following an inquiry, the CCP has recommended initiating proceedings under Section 30 of the Competition Act, 2010 against urea manufacturers and the Fertilizers Manufacturers of Pakistan Advisory Council (FMPAC).
READ MORE: Advocacy for Barter Trade Yields Positive Results, Says FPCCI Chief
The inquiry was prompted by an advertisement published by FMPAC and its members in November 2021, which announced a ‘Maximum Retail Price’ for urea during a period of rising prices and reported shortages. The CCP found that the companies’ pricing patterns exhibited parallelism, indicating possible collusion within the industry. Notably, Engro, FFC, Fatima, and Agritech displayed similar pricing trends, with minor variations.
The inquiry report revealed that prices for these companies increased in several districts, such as Rawalpindi and Layyah, over specific periods. The pricing consistency observed raises concerns about whether it was coincidental or the result of collusive activities. The urea sector in Pakistan consists of six companies, with FFC and Engro dominating the market. It is worth noting that urea producers receive subsidized feedstock gas from the government, further raising questions about pricing uniformity.
READ MORE: KCCI Rejects Approval Allowing FCA Hike to K-Electric
The recent price hikes by FMPAC and its members resulted in significant gains of Rs 1.8 billion during the Rabi season, while farmers and consumers bore the increased costs. FFC, Engro, and Fatima Fertilizer witnessed substantial profits in 2021, except for Agritech. The subsidized gas received by the sector, costing Rs 156 billion, has also raised concerns regarding fairness.
The advertisement by FMPAC announcing the price of urea collectively appears to violate Section 4(1) read with Section 4(2)(a) of the Competition Act, as it constitutes a decision that falls outside the permissible activities of an association.
READ MORE: Decline in Cement Despatches Continues, Year-on-Year Drop of 15.71%
Associations should not engage in activities that harm competition. As urea prices are deregulated, both the association and the urea manufacturers have committed a prima facie violation of the Act by collectively setting prices instead of independently informing the government, thereby contravening fair competition principles.
The CCP’s findings highlight the need for strict monitoring and regulation to ensure fair practices in the fertilizer industry. Taking appropriate action against price manipulation is crucial to safeguard the interests of farmers and consumers, as well as to promote healthy competition and market transparency.
READ MORE: IMF Assistance to Address Pakistan’s Immediate Financial Challenges, APTMA Says
