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Fertilizer industry unhappy with FBR track and trace system

LAHORE: Fertilizer makers said on Wednesday that the Federal Board of Revenue’s (FBR) Track and Trace System (TTS) in its current form would cause a severe disruption in the supply of fertilizer.

In a letter to Finance Minister Ishaq Dar, the Fertilizer Manufacturers Advisory Council of Pakistan (FMPAC) questioned the suitability of the system for fertilizer production facilities as manufacturers faced multiple issues techniques during and after the implementation of the TTS project.

The TTS was deployed by the fertilizer industry pursuant to FBR SRO 250(I)/2019 dated February 26, 2019 and General Sales Tax Order No. 3 of 2021 dated March 11, 2021 in February 2022. Tripartite agreements between manufacturers, FBR and FBR licensee (M/s AJCL/MITAX/Authentix Consortium) were signed on April 14, 2022 and the TTS was made operational across the fertilizer industry from a given deadline of July 1, 2022.

However, the industry claimed that the TTS installed on fertilizer plants suffered from serious operational problems. Industry was of the view that the system was implemented without a technical feasibility study against the procurement environment in Pakistan. Additionally, no reliable evidence of overall performance has been found in the fertilizer industry.

The industry was forced to make huge investments for the installation of the TTS, according to the letter.

“The performance of the system was dismal in an open environment, and the consortium that supplied the equipment was unable to attend to the problems. The fertilizer industry demands the replacement of the system or the reimbursement of the amount so invested,” FMPAC said, calling on the government to review the application of non-compatible TTSs installed at fertilizer manufacturing facilities.

The letter states that “the system’s incompatibility with the harsh, wet outdoor environment of the fertilizer industry renders it inefficient and unsuitable for continued use. The detection efficiency of buffers is much lower (as low as 50%) than the guaranteed value of over 99%. Reconciliation of stamps also generates errors with actual production reports, etc. Despite the best efforts of the FBR Licensee, FBR and the industry, these technical issues remain unresolved.

FMPAC Executive Director Sher Shah Malik said the fertilizer industry is one of the most compliant sectors in Pakistan and has always supported the government’s efforts in documenting the economy.

“The TTS is not considered suitable for the fertilizer industry and does not serve any of its stated purposes of increasing tax revenue, reducing counterfeiting and preventing the smuggling of illicit goods,” he said. -he adds.

Since fertilizers are exempt from GST and the industry as a whole was compliant and transparent, while paying all its taxes without understating sales and production, the TTS has no impact on revenue collection. , he added.

Malik claimed there was no evidence of counterfeiting of urea and other fertilizers.

“Domestic urea prices have always been significantly lower than those on the international market, so there is no possibility of smuggling illicit goods into the country.”

It should be noted that the complete system, including spare parts and tax stamps, was imported and represented an excessive recurrent cost given the current situation of foreign exchange reserves.

The fertilizer industry has warned the government that forcing the TTS with its unreliable operational efficiency could disrupt the fertilizer supply chain, leading to serious consequences for the agricultural sector.

Sugar and tobacco are two other sectors where TTS has been installed. Both sectors appreciated the system and felt that it not only helped document the sector, but also increased government tax collection.