Rabi season to see urea crisis for gas scarcity


In the recent meeting of Economic Coordination Committee (ECC), chaired by the federal finance minister, the proposal of allowing the import of 0.6 million tons of urea was discussed along with reducing the per bag urea prices by Rs150 to Rs1,450 per bag.
The committee, in principle, decided to allow import of 0.3 million tonnes of urea for next season, while decision of import of another 0.3 million tonnes of urea has been deferred, said an InvestCap Research report issued Wednesday.
As per ongoing gas curtailment scenario, four urea plants (Enven 1.3, DAWH, AGTL and Pak Arab) which are on SNGPL network with cumulative annual capacity of 2.1 million tonnes has been barely been operative this year.
During 1HCY12 the total capacity utilisation of these four urea plants stood at just 16 percent, while the deficit imposed due to this shut down was made up by huge urea imports of 891k tonnes (up 270 percentYoY) during the same period.
“Considering the ongoing gas curtailment scenario, we expect this Kharif, which will last till September, will go smooth as current operational capacities of 4.0 million tonnes (facing average curtailment of 10 percent) along with urea import will be adequate to manage supply side issues,” the report said adding.
“However, the situation will deteriorate in Rabi season, which will start mid November, since it is highly probable that gas availability will further worsen during winter. The current proposed 0.6 million tonnes of urea import will improve the supply situation in Rabi season”.
Even though international urea prices have slide down to $400/tonne making a high of $520/tonne during the period this year, we expect Gov’t budget of Rs25 billion for urea import subsidy this year not to be sufficient, the report said.