The Ministry of Industries and Production (MoI&P) has reportedly proposed different measures to meet the shortage of urea fertilizer in the country, well-informed sources in fertilizer industry told Business Recorder.
Giving the background, the sources said, in the meeting held on August 30, 2018 under the chairmanship of Advisor to the Prime Minister on Commerce, Textile, Industries & Production and Investment, Abdul Razzak Dawood it was anticipated that there was a possibility of urea shortage to the tune of 391,000 tons (including buffer stock of 200,000 tons) by the end of January 2019.
A meeting of the Fertilizer Review Committee (FRC) was held under the chairmanship of the Advisor on October 5, 2018 wherein it was anticipated that despite implementing the decisions of the ECC of the Cabinet of September 10, 2018 closing inventory by the end of January 2019 will be as low as 97,000 tons. It was also discussed in the FRC meeting that Pakarab Fertilizers Limited be operationalised immediately, besides Agritech and Fatimafert that are already in operation, to meet the shortage and avoid further costly import of urea.
The sources said, fertilizer industry can bear up to Rs 729 per MMBTU of gas cost. Effective gas price under the arrangement of operation on RLNG, according to decision of ECC of the Cabinet, to two fertilizer plants (Agritech Limited and Fatimafert Limited) comes out to Rs 1058/MMBTU at revised gas prices. Urea production gets economically unviable as gas cost rises to Rs 1586/bag.
The ECC, in its decision of September 10, 2018 allowed import of 100,000 tons of urea. Average international price of urea is $304 FOB and $ 325 CFR and is on the rise. Imported cost per bag including 25% incidentals comes to Rs 2702. If Dealer Transfer Price (DTP) is Rs 1532 subsidy of Rs 2.30 billion would be required on import of urea.
The ECC also raised gas price fuel stock by 30% to Rs 780 per MMBTU and of feed stock by 50% to 185 per MMBTU. The impact per bag comes to Rs 128 which as directed by ECC is not to be passed on to the farmers. In the FRC meeting held on October 5, 2018 the industry unanimously stated that it would not be possible to share the cost of subsidizing the farmer. The total subsidy required to offset the impact of gas price revision from October, 2018 to March, 2019 comes to Rs 7.5 billion.
Keeping in view the position, the Ministry of Industries and Production has proposed the following measures to the ECC: (i) ratio of gas blend be changed from 62% system gas and 38% RLNG to 75% system gas and 25% RLNG for October and November 2018 with retrospective effect, from the date of restoration of gas supply to Fatimafert Limited and Agritech Limited, as this would require no subsidy;(ii) RLNG price for fertilizer industry be capped at Rs 729 per MMBTU and the remainder be subsidized by the government. Total impact of subsidy to run two plants, Agritech and Fatimafert, from 3rd week of November, 2018 to end March, 2019 comes to Rs 7.30 billion to produce 300,000 tons urea; (iii) Pakarab Fertilizer Limited be made operational immediately for 60 days. (v) subsidy amount of Rs 7.5 billion be allocated to avoid passing on impact of gas price increase to farmers for Rabi season (October, 2018 to March, 2019) for total domestic Urea offtake of 2,935,000 tons.
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