Govt decides to import 700,000 tonnes of urea by mid-November

[Lahore_Real_Estate]

ISLAMABAD - After hitting a dead end, the domain row between the ministries of commerce and industries finally got settled with the decision that the Trading Corporation of Pakistan (TCP) will take immediate steps to import 700,000 tonnes of urea before mid November to achieve the wheat sowing target for the current year.

Targeting wheat harvest of 25 million tonnes

An official source said this was decided at a meeting chaired by the Senior Minister for Industries Chaudhary Pervaiz Elahi and attended by Advisor to Prime Minister on Industries Raja Basharat and secretaries of finance, commerce and industries and other concerned officials. The meeting noted with concern that immediate steps were required to ship in urea imports to help growers sow their wheat crop timely before the deadline of December 15 for the current Rabi season. Pakistan is targeting harvest of 25 million tonnes of wheat during the current year. The urea off-take is expected to be more than 3 million tonnes during the current Rabi season. The fertiliser companies have low inventory as they faced an unprecedented gas shortage during the year. The source said that the meeting was informed that the government has kept allocation for imports to 1 million tonnes of urea and it would be urgently released to TCP to expedite urea imports from gulf. As it was noted the time was short so TCP was directed to immediately issue tenders for urea imports. He said importing 700,000 tonnes of urea will cost the government more than $400 million and subsidy of Rs26 billion based on cost and freight of price of $530 per tonne.

Internal conflicts

The matter of urea imports was discussed at the last meeting of the Economic Coordination Committee on the cabinet (ECC) but no decision was made as the ministry of commerce had challenged the summary moved by the industries ministry claiming that the matter fell under its domain after the devolution of the ministry of food and agriculture. The industries ministry realised that imports could be done through TCP but its distribution would remain under its jurisdiction. The country has an annual urea demand of 6.5 million tonnes which could easily be fulfilled by the local fertiliser industry having capacity to produce 6.9 million tonnes per annum provided they get feedstock gas supplies. The annual production for the current year is estimated to be 5 million tonnes with an estimated urea shortage of 1.3 million. The government has already imported 500,000 tonnes of urea during the current year.

Subsidising imports

It is important to mention that urea is the major fertiliser used by farmers which meets 46 per cent of the nitrogen content. The industry estimates 90 per cent of recommended urea dosage was applied in 2010 which resulted in bumper wheat harvest of over 24 million tonnes last year. Imported urea will cost Rs3000 per bag while locally produced urea price is Rs2000 per bag. The government will have to give a subsidy of Rs1000 per bag. The urea prices have increased from Rs800 per bag to Rs1,700 per bag over the last two years as compared to Rs750 per bag increase in the last 32 years. The major reason is the decline in gas supply to fertiliser companies which has resulted in a massive hike of Rs900 per bag in last two years. The fertiliser sector, till date, has been subjected to 55 per cent curtailment as against 40 per cent or less curtailment to other sectors.

Gas curtailment limiting
capacity utilisation

Due to the curtailment of gas, the 4 fertiliser plants based on the Sui Northern Gas Pipelines Limited (SNGPL) transmission network operated at 50 per cent capacity during January June period of the current year. Even though the ECC made a decision in June to operate fertiliser plants on SNGPL at 80 per cent load on continuous basis but the decision could not get implemented, as SNGPL said it could help operate 4 fertiliser plants on rotation basis every fortnight but it was not feasible technically and economically. Since October 1, 3 plants Agritech, Engro and Dawood Hercules stopped receiving gas indefinitely. The fertiliser sector has been demanding that all the fertiliser plants should be allowed to operate at least on 80 per cent capacity as per the Gas Allocation Policy 2005 till December 31, 2011 to ensure urea availability to the farmers. Sustained gas supply will bring down urea supply demand gap and prevent urea shortage.