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Disappearance of urea - LRE - 12-08-2008 06:36 PM
By Ahmad Fraz Khan
While the wheat crop is entering its germination stage in most parts of the country and needs its first dose of water and fertiliser, urea seems to have virtually disappeared from the market.
There are reports of sporadic selling where stockists and hoarders can manage it, away from their regular shops and godowns, at a price ranging between Rs750-Rs1,000 per bag against officially fixed rate of Rs665.
With countrywide canal closure due from December 26, the stockists and hoarders know that next 20 days are crucial for application of urea and they, as always, have get their timing right.
One should not forget that this might be the last watering for wheat in brackish water zone of the Punjab, if the Mother Nature does not intervene on time. Both Sindh and Punjab overused their water quota during October and November in order to facilitate farmers at sowing stage. With withdrawals so heavy, the country, especially the brackish zone, would be in a big trouble if there are no rains and dams not filled enough during the canal closure.
Though the blame for current fertiliser crisis can be apportioned between the private sector (fertiliser manufacturing companies and dealers) and the government, the major responsibility for the critical shortage is that of the state.
As we all know, the private sector works for profit and tends to maximise it at every given opportunity. In inefficient markets, it always ends up being the winner. It is not to defend the private sector but to emphasise the role of government, which, somehow, always opens a window of opportunity for the private sector to multiply its profits.
The government, being the sole importer of the urea fertiliser, not only failed to line up imports on time, but also failed to check excessive domestic buying for hoarding purposes.
In the month of October, when farmers in Punjab normally do not need substantial quantity of urea for farming purposes, its off take in the province was recorded at staggering 299,000 tons against previous year sale of around 125,000 tons. Even if the possibility of panic purchase by farmers anticipating shortage later is also taken into consideration, a heavy portion of it must have gone to stockists and hoarders.
The import of fertiliser, which should have arrived during November, is now due for December (three shiploads) and January (four more shiploads). Whether this delay of at least 15 days, at the very crucial stage of crop, is case of sheer negligence on the part of government functionaries or connivance with fertiliser hoarders, as alleged by growers, must be looked into at the highest level.
The third crucial factor, which is still in the hands of the government, is the supply of gas to fertiliser manufacturers during the months of December and January. With load shedding of gas hitting the sector during these months, the manufacturing drops by over 110,000 tons – from 425,000 tons to 315,000 tons, if the previous years are something to go by. If the gas supplies are switched off, as being contemplated by the suppliers, the urea deficit during December can go up to anywhere between 150,000 tons to 175,000 tons, even with imports arriving as planned. Punjab alone would consume around 553,000 tons of urea during the current month.
The international price of the Di-Ammonium Phosphate (DAP) has come down by over 300 per cent – from $1,300 per ton in September to $400 per ton in December. But, domestic rate is still hovering around Rs2,800 per bag – a drop of Rs450; less than 15 per cent if the officially indicative price of Rs3,250 is something to go by. Similarly, the urea prices have come down to $270 per ton from $400 per ton. Since a bulk of urea consumption comes from domestic manufacturing, the decrease hardly matters, but it is crucial in case of the DAP.
The manufacturers say that they were not lowering the prices because they purchased it at the time of high prices – the then ranging between $1,100-$1,300 per ton.
Thus, they would only lower the price when current stocks are exhausted and fresh arrival at lower prices arrive. No one asks them what they do when international prices go up after the import. In that case, they immediately increase the price correspondingly. Even the 40 per cent domestic manufactured DAP fertiliser is sold at the latest international price. Instead of the government intervening on behalf of farmers, it is keeping an eerie silence and letting the stockists, manufacturers and dealers make money.
At current international price of $400 per ton, a DAP bag would cost manufacturers around Rs1,600 per bag, which is currently being sold at Rs2,800. No one knows what is happening to the official subsidy over Rs2,000 per bag.
The government has set a target of 25 million tons of wheat production to end the food insecurity and save precious dollars by avoiding any imports next year. But, it has failed to arrange the inputs at the right time. It knew that Rabi season would face 40 per cent water shortage, which is crucial for wheat crop. It could have tried to make up for the loss by promoting balanced use of fertiliser, through some timely administrative measures. It has failed.
At the time of wheat sowing, the DAP went missing and its usage at that stage dropped by 40 per cent. At the time of first watering, the urea has virtually disappeared. With the DAP consumption 40 per cent less than requirement, and urea spinning out of control now, how the government plans to achieve food security. No one really knows!
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