Drawing attention towards an unfolding crisis of Urea shortage, Pakistan Kissan Ittehad (PKI) has urged the government to immediately restart the two shut down urea producing factories (Fatima-DH and Agritech) or import 500,000 tons of urea for further distribution to farmers at Rs 1600 per bag.
These two factories are shut since December 01, 2019, and together can produce 80,000 tons of Urea fertilizer per month, said PKI President Khalid Mahmood Khokhar while talking to Business Recorder here on Monday.
Khokhar warned that the shortage of urea may lead to a reduction in wheat production. He said that the Ministry of Energy (Petroleum Division) issued a notification on the 28th of January, 2020 reducing Gas Infrastructure Development Cess (GIDC) on gas consumed by Urea Producers to only Rs. 5/mmbtu with immediate effect, so that the benefit of this reduction can be passed on to the farmers.
This benefit of GIDC reduction amounts to Rs 400 per bag reduction in the price of Urea. In comparison to the Rs 400 per bag expected price reduction in the price of Urea. Engro reduced price by Rs 160 per bag and Fauji by Rs. 300 per bag only.
The shortage of Urea fertilizer is the real reason why these companies have not reduced Urea price by Rs 400 per bag. The only way to bring down Urea price is by increasing supply.
Khalid Khokhar also claimed that market investors are now stocking Urea due expected shortage. This will play havoc with the supply of Urea for farmers. Urea producers are not willing to pass on the benefit of Rs. 400 per bag GIDC reduction to the farmers. Urea producers are able to do this against the wishes of the Government because Urea is in short supply in the country. Urea shortage crisis will hit the very heart of the economy of Pakistan.
Shortage and unavailability of Urea at affordable prices will reduce the current Wheat crop application of Urea and will also affect the next Cotton crop. This will spell disaster for the economy of the country and the farming community. Urea fertilizer Demand was 6.228 million tons in the calendar year 2019 as per NFDC reports.
Urea is still under-applied to the crops in Pakistan which results in low crop productivity. With a reduction in the price of Urea, the Urea demand will increase to around 6.5 million tons in 2020. The total Urea Production in 2019 was 6.171 million tons and the Government Imported 0.1 million tons in 2019 to bridge the gap.
Out of 6.171 million tons Urea produced in 2019, the two now shut down factories (Fatima-DH and Agritech) produced 0.766 million tons in 2019. The other remaining factories (Fauji, Engro, Fatima Fert) which are still producing, could only produce a maximum of 5.405 million tons Urea in 2019. There is still time to address this unfolding disaster of Urea fertilizer shortage in the country.
Pakistan Kissan Ittehad demanded that the shutdown factories should immediately be given gas to re-start production. 'If these two Urea factories cannot be restarted immediately, then at least 500,000 tons of Urea fertilizer must be immediately imported sold to the farmers at discounted rates of not higher than Rs 1600 per bag,' Khokhar concluded.