The government of Pakistan took a great decision in allowing the export of 300,000 tons of surplus urea till the 28th of April 2017. This could have helped in bridging the yawning gap between exports and imports while also earning foreign exchange. Unfortunately, it has not been executed due to the short time-frame allowed. The international fertiliser market has some specific dynamics, where the importers seek long-term commitments for trading bulk quantities through regular supplies – which is not possible with the small quantities allowed by EEC in spite of ever rising inventory of 1.3 million tonnes.
This urea export policy was based on the sugar export policy and has inherent flaws and procedural delays, leading to a tight window of only 45 days for export. The lengthy process discourages the producers to export competitively, because they cannot promise sizeable and timely deliveries to the foreign buyers. The unfavourable geo-political situation on Pak-Afghan Border has also discouraged urea exporters as Afghanistan happens to be the major destination for bagged urea.
Since the policy circles did not take advice from the stakeholders, they have wrongly applied the sugar-export model on urea-exports – ignoring the differences between trade-practices, destinations and logistics of these two commodities. The authorities concerned must take a long-term decision to allow at least 1.0 MT urea, throughout the year, whereby Pakistan can earn around 300 Million USD as export revenues.
Due to the current, flawed policy and the inability to export, the surplus urea inventory in Pakistan is consistently growing. It is expected to rise up to 1.5 metric tons by the end of the year. The storage costs of such a huge surplus will become an additional financial burden on this heavily-taxed industry. The government should realise these challenges and make timely changes in the policy, to capitalise on the great opportunities available for exporting urea.
Ammar Muzaffar
Karachi