Urea price is likely to go up by Rs 250 per bag, as the federal government is considering to increase gas tariff for fertiliser sector. Industry sources told Business Recorder on Friday that a proposal was being discussed to eliminate the price gap of Rs 218 mmbtu including Gas Infrastructure Development Cess (GIDC) between feedstock gas and fuel gas and increase feedstock gas price from Rs320 mmbtu including GIDC to the level of fuel gas price of Rs538 mmbtu including GIDC.
Industry experts said this increase will directly hurt the cost of production of local urea manufacturers, which are already facing massive gas shortage.
"We have estimated that urea cost/price will increase about Rs 240-250 per bag, if the government implemented its proposal and equal the prices of feedstock and fuel stock," they added.
Presently, locally produced urea is being sold at Rs 1,650 per bag in the domestic market and in case the manufacturers decide to fully pass on the impact of costly gas, urea bag price will increase to about Rs 1,900 per bag.
The federal government has already fixed imported urea price at Rs 1600 per bag, being imported by the Trading Corporation of Pakistan for local consumption, as the domestic urea producers are unable to produce sufficient commodity due to gas curtailment.
Industry sources said that if local urea prices will increase, the government will also require to increase the price of imported urea and this will result in massive saving on account of urea subsidy.
Urea offtake has gone up by some 25 percent to 2.75 million tons during the first five months of current calendar year 2013. With an increase of 24 percent, urea offtake surged to 2.14 million tons up from 1.7 million tons during the period under review. While DAP offtake has gone up by 58 percent to 0.27 million tons during January-May 2013.
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