Fertilizer industry is reportedly putting pressure on the government to extend urea export deadline up to December 31, 2017, well-informed sources told Business Recorder. In this regard, Commerce Minister Pervaiz Malik presided over a meeting with fertilizer manufacturers and other public sector stakeholders on November 6, 2017 and decided to delay the decision till after the Fertilizer Review Committee (FRC) meets on November 15, 2017 which is competent to recommend such a proposal to the government.
The sources said the proposal was opposed on the ground that urea demand increases in November and December and any such decision will lead to shortage of urea and increase in price in the domestic market. Giving the background the sources said that on a summary moved by Ministry of Commerce, Economic Coordination Committee (ECC) of the Cabinet in its decision of January 23, 2017 allowed export of urea fertilizer up to 0.3 million tons (MT) by April 28, 2017. The ECC also decided that FRC would meet immediately after April 28, 2017 to review the exported quantity and in case the originally estimated surplus materializes, FRC may recommend an additional quantity for export. It was also decided that FRC would monitor domestic price of urea on a monthly basis and would recommend to ECC for discontinuation of further export if there is an increase in retail price.
On another summary moved by Ministry of Commerce, ECC in its decision of May 16, 2017 allowed increase in quantity of urea for export from 0.3 Million MT to 0.6 million MT and also extended deadline for export of urea from April 28, 2017 to October 31, 2017, with the same terms and conditions as specified earlier. The sources said a meeting of the FRC was held in the Ministry of Industries & Production (MoIP) on September 11, 2017 in view of a request from Fertilizer Manufacturers of Pakistan Advisory Council (FMPAC) to extend the deadline of ongoing urea export, allowed by the ECC on January 23, 2017 and May 16, 2017 from October 31, 2017 up to December 31, 2017.
The sources further stated that the minutes of the FRC meeting indicate that there was no mention of an extension in the export deadline as requested by FMPAC. In pursuance of the FRC minutes, MoIP issued a corrigendum on September 27, 2017 conveying to all the stakeholders, except National Fertilizer Development Company (NFDC) and National Fertilizer Marketing Limited that an extension in the deadline of urea export up to December 31, 2017 had been agreed by FRC.
Another meeting of FRC was also held in Ministry of Industries and Production on October, 2017. During the meeting the final estimate of Rabi 2017-18 for urea were agreed as follows: (i) opening inventory, 0.722 million tons; and (ii) domestic production, 2.782 million tons, of take + strategic reserve, (3.200) million tons; the remaining export (0.189) million tons with an estimated closing inventory of 0.103 million tons.
All stakeholders ie all provinces, PSB, Ministries of Finance, National Food Security and Research and Petroleum and National Fertilizer Marketing Ltd (NFML) opposed the extension of export of urea beyond October 31, 2017 in view of a likely surge in the domestic demand of urea and the subsequent price hike during the upcoming Rabi Season to commence from November 2017 onward. However, Ministry of Commerce and private industry supported the proposal of extension in time period of export of urea beyond October 31, 2017. The meeting concluded that is it not safe to extend the timeline of export of urea beyond October 31, 2017.
The sources said ECC in its decisions had directed that the FRC would meet immediately after October 31, 2017 to review the exported urea quantities and if the originally estimated surplus materializes, the FRC may recommend an additional quantity for export. It was evident from the minutes of the FRC meeting held on October 13, 2017 that the domestic price of urea is under control and stood lower than the baseline price of Rs 1400/ 50 Kg bag.
The latest urea export quota utilization as received from SBP is as follows: (i) total allocated, 600,000 MT ;(ii) used up quota, 558,912 MT - 93.15% and ;(iii) available quota, 41,088 MT - 6.85% The urea export effected till October 13, 2017 was around 410,000 MT as reported by FMPAC. The export data from Pakistan Revenue Automation Limited (PRAL) reported export of around 111,000 MT as of October 04, 2017. However, all the stakeholders present in the FRC meeting held on October 13, 2017 unanimously agreed on the export figures reported by FMPAC. As per latest PRAL data, urea export of around 125,378.2 MT was made as on November 03, 2017.
One of the representatives of fertilizer industry told Business Recorder that the industry's main interest was to honour its commitments to buyers especially those in Sri Lanka. He said a fine of Rs 122 million on companies which is 15 per cent of contract value, has also been imposed for not honouring the contracts after registration due to paucity of time. Answering a question, he said that Ministry of National Food Security and Research has paid only Rs 2 billion subsidy to the industry against total amount of Rs 20 billion.
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