Urea prices feared to rise by Rs200 per bag

Fertiliser industry players warn hike in gas tariff will hit agriculture sector

LAHORE: Urea prices would rise Rs200 per bag if the tariff structure of gas companies was revised upward, warned the fertiliser industry.

According to industry stakeholders, public gas utilities - Sui Northern Gas Pipelines Limited (SNGPL) and Sui Southern Gas Company (SSGC) - have filed petitions with the regulator for determining gas prices for financial year 2020-21.

SNGPL has sought a tariff increase of around 100% (Rs622 per million British thermal units) while SSGC has sought an increase of 20% (Rs85 per unit) to meet revenue requirement for the upcoming financial year. “If the Oil and Gas Regulatory Authority (Ogra) accepts the petition, this will mount the burden on all industrial sectors and consumers,” they said.

At the same time, the fertiliser sector will also be affected and this will lead to a significant increase in prices of essential fertilisers, especially urea. In December 2019, Ogra had recommended a 135% increase in fertiliser feed gas price, along with 32% increase in fuel gas price, which was revised by the Ministry of Petroleum, proposing 5% increase in fertiliser feed gas price and 64% hike in fuel gas price to Rs1,672 per unit, they said.

Although the proposal was not implemented by the government at the time, urea prices would go up approximately Rs213 per bag if the government went ahead to match the recommended gas price hike, they added.

Industry stakeholders feared that any price hike was likely to increase the burden on farming community amid the Covid-19-induced slowdown and severe locust infestation that had destroyed thousands of acres of cultivated areas.

Urea offtake had declined drastically during the year due to the worsening farming situation and the government’s subsidy announcement due to which farmers delayed fertiliser purchase decisions, they added.

Furthermore, according to the stakeholders, recent budgetary amendments to tax laws have increased challenges for the fertiliser industry, which may require a further increase in urea prices by Rs200 per bag.

Published in The Express Tribune, June 23^rd, 2020.

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