ECC okays up to 5% increase in urea prices

Urea manufacturers will receive Rs30b from consumers in one year

ISLAMABAD:

The government on Tuesday approved an increase of up to Rs171, or 5%, in urea prices to recover the cost of imported fertiliser after both the centre and provinces refused to bear the cost of subsidy.

The arrangement was approved by the Economic Coordination Committee (ECC) of the cabinet after entering into an agreement with the local urea manufacturers. In an arrangement that may raise anti-competitive concerns, the urea manufacturers would pick the imported urea from ports, sell it to consumers and recover over Rs30 billion from them in one year through an additional Rs160 to Rs171 per bag.

The Ministry of Industries and Production had tabled a summary for increasing urea prices through a basket price mechanism.

The ECC approved the weighted average price mechanism with the directive to National Fertiliser Marketing Limited to ensure a reasonable price of urea and the Ministry of Industries to oversee the entire process, according to a statement issued by the finance ministry. Urea is being sold in the market at abnormally high prices due a nexus between the manufacturers and their dealers, fleecing farmers. However, owing to the failure of federal and provincial governments in reaching an agreement over subsidy, the federal government entered into negotiations with the urea manufacturers to recover the cost of imported urea.

The government had imported 220,000 tons of urea to bridge the shortfall. The cost of imported urea was Rs6,250 per 50kg bag, excluding transportation charges. Compared to this, the local urea price was in the range of Rs3,600 to Rs4,000 but it was available in the market at Rs5,500 to Rs6,000 per bag.

After the increase in prices, urea will still be cheaper by about half compared to the prices of imported urea. The federal government had earlier agreed that provincial governments would bear the cost of subsidy. But only Punjab offered to pay 50% of subsidy.

Due to the disagreement, the matter was reported to the Special Investment Facilitation Council (SIFC) that instructed the government to resolve the issue on priority.

Read Sindh govt imports urea worth Rs4.5b

After the ECC’s decision, the cost of urea will increase from the range of Rs3,600-4,000 to Rs4,140 per bag.

It is for the second time the government has passed on the cost of bad governance to consumers. Earlier, the ECC approved the recovery of the cost of subsidised gas to fertiliser plants from the domestic consumers.

The cabinet committee also approved Rs3.9 billion in supplementary grants for various entities. It gave the nod for providing Rs250 million for the Intelligence Bureau. The Intelligence Bureau briefed the committee about the recent surge in terrorism which needed effective counter measures to thwart the nefarious designs of terrorists, according to the finance ministry.

The ECC approved a summary of the National Health Services, Regulation and Coordination for the provision of a supplementary grant of Rs3.6 billion to the Federal Directorate of Immunisation, and urged provinces to clear their liabilities.

It considered a summary of the Finance Division for signing an addendum to the Subsidiary Grant Agreement regarding the financial inclusion and infrastructure project and exemption from relending policy for the release of funds to the State Bank of Pakistan, and accorded its approval.

A summary of the Ministry of Inter Provincial Coordination was tabled for the release of grant for the participation of Pakistan’s hockey team in international events and other sports promotion activities.

The grant would also be utilised for the Davis Cup (tennis tournament) with India and other mind games like scrabble.

The committee approved the provision of additional funds amounting to Rs100 million as a technical supplementary grant for FY 2023-24. A chunk of Rs100 million will also go towards the launch of mind games programme of interim Prime Minister Anwaarul Haq Kakar.

Published in The Express Tribune, January 10^th, 2024.

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