Urea talks continue with Russia, China, Azerbaijan

ISLAMABAD: The government is reportedly engaged with Russia, China and Azerbaijan for purchase of 0.2 million tons of urea fertiliser for Rabi season as both PPRA Board and federal cabinet have cleared the proposal of Ministry of Industries and Production (MoI&P), well informed sources told Business Recorder.

However, ECC is yet to accord approval of the negotiated price offered by the parties which participated in urea tender.

According to Additional Secretary (Incharge) Ministry of Industries & Production, Asad ur Rehman Gilani, Rabi season has started and the country was short of 200,000-MT urea fertiliser due to closure of local plants for two months.

Urea tender validity extended till Monday: All bidders match the lowest bid price

“The demand of Rabi season spikes in December and January which necessitates generation of required stock to meet the demand. The minimum required stock is 200,000-MT urea,” he said opining that hat since July, 2023 the Ministry of Industries and Production has written five summaries in this regard.

Thereafter, the matter was placed in Economic Coordination Committee (ECC) where the matter of shortage of urea was deliberated at length keeping in view either of the two requirements for urea.

He said, the first requirement was to opt for local production of urea which requires gas. Unfortunately, domestic gas is not available for local production of urea. However, RLNG is available at a price in the range of $ 15.93 and $ 15.97 per MMBTU, which is not affordable thus making it impossible to provide subsidised urea.

The second requirement was to import the required urea involving foreign exchange component. This matter was placed in ECE on October 23, 2023 where after thorough deliberations ECC allowed import of 200,000-MT urea subject to two conditions: to proceed with G2G agreements in view of the shortage of time while ensuring price discovery/ price mechanism.

Additional Secretary (Incharge) MoI&P further apprised the PPRA Board that for price discovery mechanism Trading Corporation of Pakistan (TCP) has come to the forum of PPRA Board. TCP will engage in tendering.

Normally, 45 days are required for international tender; however, if five PPRA rules are relaxed then TCP would be able to curtail this tendering time to 15 days.

He invited attention of the Board to the fact that international ranking of urea market is available with Argus, which is a leading independent provider of market intelligence to the global energy and commodity markets.

According to the said market intelligence provider, pricing of urea is low at the moment due to the fact that no huge tender has been floated except a partial Indian tender.

He further explained that India’s total requirement is 2.5 MT.

According to MoIP’s sources in China, Russia and Azerbaijan, urea pricing is available within the range $ 415 to $ 420 CFR Karachi which is likely to go up as last year too the Ministry had imported urea at a significant higher price.

He opined that the reason for asking exemptions from certain provisions of the Public Procurement Rules, 2004 was that while the government is engaged in G2G agreements with the State Owned Enterprises (SOEs) in Russia, China and Azerbaijan, a quick tender can be helpful.

Copyright Business Recorder, 2023