Thursday, January 20th, 2022
Home »Agriculture and Allied » Pakistan » What is ‘actually’ behind urea price rise?
The federal government is abuzz with "inside" information that the domestic fertilizer industry is involved in urea stocking due to which price of commodity is showing a continuous upward trend, well-informed sources told Business Recorder. However another view is that the Ministry of Industries and Production has taken a few half measures to control shortage of urea and bring down its market price at a time when wheat sowing season was at its peak which proved ineffective and urea prices have shown an increase of Rs 10 per bag since fixation of imported urea at Rs 1712 per bag to Rs 1860 from 1850 per bag.

The sources said, provincial governments which are supposed to take administrative measures to control urea prices have not played their due role in ensuring sale of urea at printed rate.

"I think one plant which will shut down after a couple of months, is not offloading its entire production of urea and is involved in raising stocks," said an official in Ministry of National Food Security and Research on condition of anonymity.

Official sources told Business Recorder that in order to improve supply of urea fertilizer, ECC in its meeting on December 4, 2018, considered proposals by Ministry of Industries & Production (MoI&P), i.e., two fertilizer plants that are on Sui Northern Gas Pipeline Company's (SNGPL) system should continue operation till January 31, 2019 and price of gas may be capped at Rs 782/MMBTU by picking up the price differential which would be credited to SNGPL as subsidy.

ECC, while according approval, constituted a committee to review the pricing issue. The committee comprising MoI&P, Finance Division, Petroleum division, Law Division and Federal Board of Revenue was tasked to take into account possibility of offsetting GIDC demand as subsidy, viability of Rs 150/bag as variable contribution margin and mechanism of payment of subsidy to SNGPL. MoI&P was to incorporate the finding of the committee in the summary for the Cabinet and further allowed to move the summary for supplementary grant.

The committee was convened the same day and it was agreed that (a) GIDC cannot be adjusted against subsidy, (b) Variable Contribution Margin (VCM) already worked out by MoI&P in consultation with all stakeholders was appropriate and therefore rationale of capping gas price at Rs 782/MMBTU and that (c) MOI&P will initiate the summary for the Cabinet's approval for amount and mechanism of subsidy and for the supplementary grant so required.

The sources stated that for augmenting supply of urea and its production at viable cost, MoI&P proposed that SNGPL may be given subsidy as follows: (i) Rs 167/MMBTU (weighted average) for supply of gas to Fatimafert and Agritech for the gas consumed at 62.38 blend till December 7, 2018; (ii) Rs 869/MMBTU on supply of 1005 RLNG to these plants from December 08, 2018 to January 31, 2019; (iii) the amount of Rs 0.79 billion may be paid forthwith on actual basis and Rs 3.91 billion (approx) may be paid in two monthly tranches on December 7, 2018 (or as early thereafter) and January 7, 2019; the latter is subject to final reconciliation; and (iv) in the CFY 2018-19 no budgetary allocation has been made in the demand of Ministry of Industries & Production for this scheme and Federal Cabinet may allow supplementary grant of Rs 4.70 billion in the relevant demand of MoI&P for payment of price differential as subsidy to SNGPL. The cabinet, in its previous meeting had accorded approval of this proposal, submitted by the MoI&P.

Copyright Business Recorder, 2019

the author

I did graduation from the Government Murray College Sialkot and MSc in Psychology from the University of Punjab. I am in journalism since 1990. I worked in Daily Nawa-i-Waqt as sub editor and staff reporter in Daily Pakistan and Daily Din prior to joining Daily Business Recorder. I have been associated with this newspaper since 2000 as staff reporter. Energy Sector, Commerce / Trade and Industries are key areas of my interest. I have also the credit of exposing number of scams like Rental Power Plants (RPPs), LNG, sugar import, etc.