Import of 400,000 tons of urea: Rs five billion subsidy if shipments arrive by October 31

The government has decided to provide rupees five billion subsidy on import of 400,000 tons of urea, provided the shipments arrive in the country by October 31, 2009, well-informed sources told Business Recorder Saturday. The Economic Co-ordination Committee (ECC) of the Cabinet, in its meeting on September 15, allowed import of 400,000 tons of urea through private sector, with a subsidy of Rs 750 per bag to the importers on the first come first serve basis.
Some analysts, however, are of the view that the term first come first serve is another name of "Parchi" destined only for influential importers. According to them, the ECC failed to take specific measures to ensure quality of imported urea - a necessary requirement given in the past, encouraging import of substandard urea.
The sources said that the ECC had set only one condition that the subsidy will be paid at the time of release of consignment on submission of bill of lading to the State Bank of Pakistan (SBP). The SBP, however, had been asked to monitor and withhold the issuance of letter of credits (LCs) on the achievement of set target of 400,000 tons, said the sources.
Pakistan produces around 4.8 million tons of urea as against the requirement of 5.8 million tons. The shortfall of around one million tons is met through imports. The Fertiliser Review Committee (FRC) at a meeting held on August 18 observed that there could be shortage of around 300,000 tons of urea during November-December, 2009 and January 2010, which would jeopardise the sowing of main crops during Rabi season.
To ensure adequate availability of urea during 2009-10 Rabi season, the government decided to import 400,000 tons of urea before November. Since 2008, imported urea is being distributed in the country through National Fertiliser Marketing Limited (NFML), an attached department of the Ministry of Industries and Production.
The government extends a subsidy of Rs 900-1,000 per 50-kilogram bag to keep the price of imported urea at par with the locally manufactured urea. The Minfa, in its summary, has proposed that keeping in view the experience gained during the last year, it would be worthwhile to probe the option of import of urea at par with the local urea. The sources said the option to import urea through private importers would be quite advantageous on the following counts:
-- The government will not have to spend precious foreign exchange on import of urea.
-- Private sector import of urea will generate healthy competition and will stabilise the prices and ensure widespread availability.
-- It will reduce the amount of subsidy and would prove more cost effective.
-- Imports by the private sector usually arrive within a month, whereas the imports by the Trading Corporation of Pakistan (TCP) generally materialise in 2-3 month.