With over a 113 per cent increase in urea prices during the last year, coupled with looming urea shortage and absence of support price for the wheat crop will pose a serious threat to the country’s food security if no timely measures are taken.
Cost of production
An official source said the farming community was perturbed over the non announcement of the wheat support price as the cost of production has significantly increased due to the hike in urea, diesel and inputs prices.
The wheat support price was enhanced from Rs650 per 40 kg in 2008 to Rs950 per 50 kg in 2009 that enabled a bumper
yield of 24 million tonnes. This step also allowed the country to enter the club of wheat exporting countries.
Back to food importing status?
There is no single meeting held at the federal level on deciding the wheat production for next year under the new system. However under the previous system the provinces used to report weekly on the crop update with regular meetings. Now the ‘babus’ of the ministries where agriculture subjects are devolved are not aware of their importance and one wrong step will push the country back to food importing status, the source said.
Devolution of ministry
After the devolution of the Ministry of Food and Agriculture, the system of monitoring food security has completely broken down. There is no coordination at the federal level on the same subject; the source said adding that no federal ministry was in the knowledge of provincial plans on wheat sowing. After making agriculture a provincial subject, the devolution even at the federal level had been carried out in a hap-hazard manner. The planning subject is handed over to Planning Commission, research to the Ministry of Science and Technology, support price mechanism to Inter-Provincial Coordination and procurement of commodities to the Ministry of Commerce. The provinces are responsible for setting their own targets for wheat sowing previously federal government used to advise provinces.
Urea prices
The Sensitive Price Index (SPI) of the week ending on October 20, 2011, shows an unprecedented growth of 113 per cent in the prices of urea, as the price of Kisan urea was Rs1770 per bag as compared to Rs830 per bag on 21st October 2010. There is another 55 per cent growth in DAP which has increased from Rs2705 per bag on October 21, 2010 to Rs4189 per bag on the week ending on 20th October 2011.
Impact of Urea prices
The increase in urea prices and low availability will directly impact its use by the farmers and without a suitable support price the farmers will not take the risk of using balanced fertilisers, as the high cost of production may not be compensated through the official support price. The urea off-take this Rabi is expected to be more than 3 million tonnes. 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. The fertiliser companies have low inventory as they faced an unprecedented gas shortage during the year.
Local fertiliser industry
The country has annual demand of 6.5 million tonnes of urea. This demand could be easily fulfilled by the local fertiliser industry, since it has the 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. The government plans to import 700,000 tonnes of urea that will cost more than $400 million and subsidy of Rs26 billion based on cost and freight of price of $530 per ton.