Farmers suffering

Lack of consensus among urea producers, policy planners

A tug of war has been going on between the elements adamant at importing urea and its local manufacturers. With regular intervals the need for importing urea is raised, whereas the industry experts have a contrary view. There prevails a consensus among urea manufactures that they are capable of exporting up to one million tons urea per annum, if the right impetuses are provided: uninterrupted gas supply and control over smuggling of urea to the neighboring countries.

It may be recalled that lately Imran Ahmed, CFO, Engro Fertilizers in an interview highlighted that local urea manufactures have an aggregate installed capacity of 7 million tons, whereas they produce around 6 million tons due to subdued indigenous demand. He also highlighted that Pakistan can export up to one million tons urea per annum, if required quantity of gas is supplied. However, soon after publication of his interview there was uproar of the shortage, black marketing and hording. This provided an opportunity to the group having vested interest to ask the government to import 100,000 tons urea on urgent basis.

In one the recent meeting the Economic Coordination Committee (ECC) of the cabinet, presided over by Minister for Finance and Revenue Shaukat Tarin approved import of 50,000 tons urea from China on an immediate basis subject to clearance from the Pakistan Standards and Quality Control Authority. The meeting allowed import of urea on a government to government basis and tasked the Trading Corporation of Pakistan with negotiating the price with a Chinese supplier authorized by the Government of China for further import of urea.

Fertilizer Manufacturers of Pakistan Advisory Council (FMPAC) had suggested to the government to import 100,000 tons urea to build the buffer stock. “This decision will help end psychological pressure on the farmers regarding the urea shortage,” said FMPAC Executive Director Retired Brig Sher Shah Malik. He said that currently the fertilizer industry was selling around 20,000 tons urea per day and the imported stock of 50,000 tons could last only less than three days. He said the urea industry thought that there had to be some buffer stock in the country.

Earlier, a Parliamentary Committee had noted that the gas supply disruption to fertilizer plants during the June-September period had caused a shortage of 200,000 tons urea. Discussing the urea shortage, the Senate Standing Committee on National Food Security and Research also observed that the Economic Coordination Committee (ECC) of the Cabinet had decided that urea plants would remain operational from March to November. However, the plants remained non-operational during June 28 to September 16, resulting in reduction in urea production by 200,000 tons.

“We are suffering today due to a shutdown of urea plants. Why has a responsibility yet not been fixed? Why have people in the Ministry of Petroleum not been held accountable?” asked committee chair Syed Muzafar Hussain Shah.

The committee observed that this lapse will result in urea hoarding, price hike and an artificial shortage. It insisted on knowing who was responsible for keeping the urea plants shut between June and September. However, the response from the Ministry of National Food Security and Research was that no responsibility had been affixed.

“The committee recommends that inquiry be held why urea plants were shut despite the decision taken by the ECC, which has resulted in a grave crisis in the agriculture sector leading to rising prices of urea, shortage, black marketing besides the adverse effects on yield of wheat,” said Shah.

The committee was informed by the food security ministry that the matter of gas shortage was taken up on various forums to ensure the supply to urea plants.

It complained that due to the urea shortage the production of other crops such as cotton had also suffered. Many members of the committee complained non-availability of urea and wheat in their localities.

Another member drew the attention towards smuggling of urea to other countries where producers could fetch a much higher price as compared to domestics market.

The ministry officials informed the committee that there was shortage of urea the world over, including India. China and Russia had stopped exporting urea. Pakistan was self-sufficient in the production of urea had the gas shortage not occurred.

During the first 10 months (January-October) of the current calendar year, 5.1 million tons urea was sold as compared to 4.6 million tons in the same period last year. The local industry continued to ensure adequate and affordable supply of urea, an unprecedented level of discount to international prices has led to market manipulation and significant black marketing by middlemen/dealers.

With the operation of RLNG plants and adequate inventory levels, the fertilizer industry would be able to meet the full year demand of 6.3 million tons — a record in 10 years on the back of improved farm economics.

Imports of urea would result in significant depletion of foreign exchange reserves and a sharp rise in the current account deficit of Pakistan.

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