Govt to import expensive urea to meet shortfall

The government on Friday approved import of 100,000 metric tons of fertiliser at a price of $359 per ton but turned down a proposal for doling out Rs5.9 billion in subsidy to match local urea prices – in a move that would bridge the shortfall but disturb market prices.

The Economic Coordination Committee (ECC) of the cabinet took the decision on urea import while turning down the subsidy request of the Ministry of Industries. Finance Minister Muhammad Aurangzeb chaired the ECC meeting. “The cabinet committee approved the proposal of the Ministry of Industries and Production for import of 100,000 tons of urea,” the Ministry of Finance said in a statement.

“This decision is aimed at ensuring sufficient supplies of urea in the market,” it added. “This will also ensure stability in fertiliser prices during the crop sowing season.”

In May this year, the ECC had decided to import 200,000 metric tons of urea through competitive bidding and on a government-to-government basis.

The Trading Corporation of Pakistan (TCP) issued a tender for the import of 150,000 tons of urea, which was opened on Monday. It informed the ECC that six bids were received with the lowest bidder being West Trade International of the UAE.

The UAE-based company offered a price of $359 per ton, which was quite high, compared to the cost of earlier imports but it was the lowest price among the offers made by the bidders.

The industries ministry told the ECC that the price of imported urea would be Rs7,332 per bag including the freight and handling charges of government departments. It needed a subsidy of Rs2,932 per bag to match local prices. However, the finance secretary refused to provide any subsidy on the premise that there were no allocations in the budget and last year also the government had not paid any subsidy on the imported urea.

The industries ministry had sought Rs5.9 billion in subsidy to keep imported urea prices in line with the local market. Excluding freight and handling costs, the imported urea price was Rs5,832 per 50kg bag, the ECC was informed.

The cabinet committee also did not approve another proposal suggesting government-to-government negotiations for finding other cheaper sources of urea import. The meeting was told that government-to-government negotiations were held with Malaysia and Azerbaijan but both countries offered higher rates compared to the competitive bidding. Negotiations with Turkmenistan for urea purchase on a government-to-government basis and efforts for getting approval from China were also ongoing.

The ECC was informed that the country may not need any further urea import provided the Punjab-based fertiliser manufacturers were supplied imported gas. If gas supply was suspended to those plants during the Rabi sowing season, there would be a shortage of 351,000 tons.

The ECC asked the industries ministry to find a solution to keep fertiliser supplies constant for meeting the cultivation requirements.

The Ministry of Industries did not circulate its summary for comments from the departments concerned despite the fact that it opened the tender five days ago.