Urea prices witness phenomenal increase

Prices may further increase by Rs464
Fertiliser prices in the country have witnessed a steep increase of Rs750 to Rs800 per bag during the last 18 months, which is equivalent to an accumulative increase during the last 32 years. If gas curtailment issue is not settled on priority fertiliser prices would further increase by Rs464 per bag, which would ultimately jeopardise the national food security. These remarks were made by Engro Corporation President and CEO Asad Umar, while addressing members of Agriculture Journalists Association (AJA) here on Thursday. He underlined that natural gas was a basic raw material of the fertiliser industry that has contributed to a price rise of Rs375 of urea bags since January 2010. In addition to gas shortage, Umar estimated, that urea deficit had further swelled fertiliser prices by Rs170 per bag, while the imposition of General Sales Tax of agriculture inputs added Rs184 per bag. He indicated that fertiliser manufacturers costs had increased by merely Rs17 or two percent per bag during the period under review.

Sector received three day gas supply
According to the natural gas allocation policy, Engro chief pointed out that fertiliser plants had the highest priority after domestic consumers, but the sector had been considered as least significant. He said that CNG stations were offered supply for five days and other industry was provided four days supply while the fertiliser sector received only three day weekly gas supply during the first half of 2011. He lamented that the government was running important economic affairs on an adhoc basis, which resulted in Rs1,380 urea bag being sold at Rs1,700 to Rs1,800. Umar categorically said that if the government put its house in order and exclude the fertiliser sector from natural gas load management plan, the prices could easily be brought down to Rs935 per bag. Highlighting the fertiliser price statistics in different parts of the country, he said, urea was available at Rs1,600 to Rs1,700 per bag in different areas of Punjab while it was selling at Rs1,800 per bag in Khyber Pakhtoonkhwa. However, the same commodity was available at Rs750 to Rs800 per bag before gas curtailment to the sector in January 2010.

Gas shortage choked export potential
Umar indicated that after adding new production capacity of two million tonnes, it was expected that the country would be able to export some half a million tonne of urea. Gas shortage not only killed the export potential but also badly affected the domestic supply, he maintained. He said that fertiliser was a processing industry and new plants were so advanced that they could run continuously for three years without shutting down, but owing to gas shortage he was forced to shut down his plant 17 times during this season, which not only increased production losses but also exposed great risk for machinery. He estimated that the government had to import 3.5 million tonne of urea, incurring a cost of Rs130 billion however if the domestic industry shuts down this amount could in effect increase manifold.

World Bank responsible for sector crisis
He blamed World Bank officials as the real culprits behind the industry’s exacerbating problems since they suggested that the country should use natural gas for power generation and import urea. He lamented that policymakers in Pakistan blindly followed reports of international donors, without considering ground realities. Drawing comparison between import costs of different energy sources, he estimated that per mmbtu (million million British thermal unit) import cost of furnace oil was $18 and diesel $22, while imported urea cost $32 and unfortunately Pakistan had opted for the most expensive option.
Responding to a query, Umar tried to dispel the impression that farmers and rural economy was booming owing to an increase in commodity prices. He underscored that a large number of subsistence farmers did not produce any marketable surplus and increase in the price of agricultural inputs had badly affected their productive capacity.
Agritech Chief Executive Office Ahmed Jaudet Bilal and representatives of Fauji Fertiliser also highlighted the problems of the fertiliser sector. However, all stakeholders were of the consensus that unfavourable government policies were the root cause of fertiliser shortage and price increase for the farming sector.