Giving the background, the sources said, Economic Coordination Committee (ECC) of the Cabinet in its meeting held on January 1, 2019 directed the Ministry of Industries and Production to present a comprehensive plan, projecting the demand, production and supply of urea fertilizer within a fortnight, so as to avoid any shortage in future. In pursuance of the directions of the ECC, the situation was examined in consultation with stakeholders by convening a meeting of Fertilizer Review Committee (FRC). It transpired that: ( i) urea requirement from February 2019 to January 2020 is estimated at 5.98 million Metric Ton (MT); (ii) prima facie, urea availability would be sufficient for period ending January 2020, the estimated closing inventory then would be 482,000 MT. Secondly, throughout the next 12 months stocks will remain above the buffer stock level of 200,000 MT, subject to condition that two plants on SNGPL system i.e. Fatimafert and Agritech also remain operational otherwise there is likelihood of a negative inventory that would have to be covered through imports.
The sources said, it is assumed that during the first nine months of 2018 (for which the statements are available in public domain) the major players i.e. Engro and Fauji Fertilizer Company (FFC) made unprecedented profits - from 77 percent to 43 per cent more than last year(Engro Rs 12.5 billion from Rs 6.93 billion and FFC Rs 8.53 billion from Rs 5.94 billion).
Officials in the Ministry of Industries and Production are of the view that due to a very limited number of procedures and abnormal profitability there is a possibility of cartelization.
Ministry of Industries and Production has also lodged complaint to the Prime Minister, Imran Khan who is also the Minister Inchage of Ministry of Industries and Production that Energy Division was requested to intimate the gas availability pattern for the period but it was neither given during the meeting nor in response to subsequent requests.
According to sources, Ministry of Industries and Production has proposed that Energy Division may ensure supply of natural gas to urea plants throughout the year on the same pattern as was done during Rabi 2018-19, local production being less costly than imports. The MoI&P has also recommended that the apparent abuse of dominant position, as defined in section 3 of the Competition Commission of Pakistan (CCoP) Act 2010 may be investigated by CCoP and quantum of subsidy for price equalization may be determined thereafter.
The sources further stated that the Mo&IP's proposals are expected to be discussed by the ECC, in its forthcoming meeting. In 2013, the CCP had slapped a maximum collective penalty of Rs 8.6 billion on Fauji Fertilizer and Engro Fertilizers - the two largest urea manufacturers in the country - after both entities were found involved in the "excessive pricing of urea".
