Govt decides to import urea on G2G basis

ISLAMABAD: The federal government has reportedly decided to import 0.2 million tons of urea on G2G basis preferably from China and quiz local urea manufactures on inflated prices across the country, sources close to Minister for Commerce and Industries told Business Recorder.

Presided over by caretaker Finance Minister Dr Shamshad Akhtar, the Economic Coordination Committee (ECC) of the Cabinet has also directed Petroleum Division to holistically review the existing contracts and firm up proposal on uniform gas pricing with either on full RLNG or blend basis as Finance Division wants differential on account of provision of RLNG to two SNGPL-based urea plants may be built in the revenue requirements of SNGPL and recovered from other consumers, the sources added.

On October 23, 2023, the ECC was informed that the Ministry of Industries and Production submitted a summary to the ECC for extension in operations of SNGPL-based fertilizer plants beyond October 15, 2023 to March 31, 2024 for import of 200,000 MT of urea and provision of maximum gas volume/ pressure to Fauji Fertilizer Bin Qasim (FFBL).

Urea for Rabi season: Gas supply to Fatima, Agritech plants will continue: ECC

The summary was considered by the ECC in its meeting of October 3, 2023; however, it was still awaiting decision/ ratification by the Cabinet.

Ministry of Industries and Production approached Prime Minister’s Office for a decision on it. Prime Minister’s Office directed due to the seriousness and urgency of the matter, the summary shall be placed before ECC for its consideration at priority, and it may be reviewed by the Prime Minister on October 24, 2023. A meeting was chaired by caretaker Finance Minister on October 22, 2023 wherein Ministry of Industries and Production was directed to coordinate a meeting with Finance, Petroleum and National Food Security and Research and submit viable recommendations to the ECC for meeting the demand of urea fertilizer for the Rabi season 2023-24.

Ministry of Industries and Production noted that a meeting in this regard was convened on October 24, 2023, wherein after detailed deliberations following recommendations were finalised: (i) uninterrupted gas supply to all fertiliser plants (SNGPL-based plants and FFBL); (ii) Petroleum Division to firm up proposal on uniform gas pricing with either on full RLNG or blend and submit a summary to the ECC afterwards ; (iii) immediate import of 200,000 to 500,000 MT urea; (iv) subsidy on imported fertiliser to be borne by provinces;(v) a Federal Committee to be constituted by ECC to get justification from manufactures on increase in Minimum Retail Price (MRP) overtime and;(vi) Finance Division suggested that due to absence/ depletion of system gas, RLNG may be supplied to Fatima Fertilizer (Sheikhupura) and Agritech in the short term at OGRA-prescribed price and differential on account of provision of RLNG to SNGPL-based plants may be built in the revenue requirements of SNGPL and may be recovered from other consumers. During the ensuing discussion, it was opined that substantial foreign exchange would be required for import of both RLNG and urea, which may cause a burden on our limited foreign exchange reserves. It was stated that Merit Order for supply of gas to different sectors should be re-prioritized in view of our economic position.

It was stated that the country’s gas reserves had been depleting fast. It would be difficult to continue the supply of indigenous gas to Fatima Fert and Agritech fertiliser plants during Rabi season. However, a blend of RLNG and indigenous gas could be supplied to both plants.

It was stressed that the high cost of RLNG should not be passed on to poor farmers, but it should be borne by fertiliser plants, themselves. It was agreed that blend of RLNG and indigenous gas in proportion of 50:50 ratio may be supplied to Fatima Fert and Agritech fertiliser plants subject to availability of indigenous gas. Petroleum Division should develop mechanism for recovery gas cost differential. The ECC also agreed for import of 200,000 MT of urea through TCP to meet its requirement during current Rabi season. It was suggested that urea may be imported on government to government (G2G) basis as last year the urea was imported from China through said mode which was quite beneficial.

After detailed discussion, the ECC took the following decisions: (i) allowed import of 200,000 MT of urea through TCP. For the purpose, best option either through G2G or open tendering shall be explored;(ii) directed Petroleum Division to supply blend of RLNG and indigenous gas in proportion of 50:50 ratio to Fatima Fert and Agritech fertiliser plants; (iii) directed the Committee already constituted by ECC in its meeting on October 03,2023 to hold a meeting with the fertiliser manufacturers on the fertiliser pricing issue;(iv) directed the Petroleum Division to holistically review the existing contracts and firm up proposal on uniform gas pricing with either on full RLNG or blend basis and submit the summary to ECC ;(v) subsidy on imported fertiliser to be borne by provinces and directed Secretary, Finance Division and Secretary, industries and Production Division to take the provinces on board on import of urea with a view to bearing the cost of subsidy imported urea by provinces and; (vi) to ensure that there is no increase in the prices of fertiliser for farmers.

Copyright Business Recorder, 2023