Urea prices likely to go up by Rs100-175 per 50kg bag
Saturday, December 17, 2011
LAHORE: Following yet another sudden curtailment of natural gas to Sui Northern Gas Pipelines Limited (SNGPL)-based fertiliser manufacturing plants, price of 50kg urea bag is expected to increase by Rs100-175, sources said on Friday.
Because of short supply of locally-manufactured urea there is a likelihood that imports are delayed and may not fully cater to the peak demand of the ongoing Rabi season, they said. They also said that the authorities of Sui Northern after facing high demand for natural gas from domestic sector, decided to suspend gas supplies of all the four plants on its network.
These plants with an estimated urea production capacity of 2.2 million tons are now closed for an indefinite period, the sources said. The fertiliser companies are currently selling a 50kg bag at around Rs1,480 inclusive of the general sales tax (GST). Local manufacturing plants have refrained from increasing price of fertiliser primarily because they were provided gas lately by Sui Northern on the directives of the prime minister, the sources said, adding that the intervention by the federal government was aimed at encouraging production of the local urea to overcome fertiliser shortage in the ongoing Rabi season.
Gas supply to local fertiliser plants even also resulted in price decrease in the market as augmented supplies limits trend of hoarding.
Now, when gas is once again not available for urea production and supply has started decreasing in the market with every passing day, the hoarding and black marketing tends to increase once again, the sources said.
Although fertiliser manufacturers say that they have no plan to increase urea prices immediately, one can ultimately expect a price increase of urea if non-supply of gas continues further, they said.
The fertiliser industry reduced the per bag urea price to Rs1,480 from the previous Rs1,580 about a month back after the government had assured the fertilizer sector that in order to meet the urea demand for the Rabi season, it would continue to supply gas till December 31.
But in sheer contrast to the commitment given to the fertiliser sector, two out of four fertiliser plants on SNGPL network were shutdown abruptly with the start of December and the gas supply of remaining two were now also stopped, the sources said.
The price of 50kg urea bag had touched the highest official price of Rs1,900 per bag this year due to successive cuts in gas supplies, which is used as a raw material for urea manufacturing.
Later, the government’s better and timely action brought the price down to Rs1,480 per bag. However, the sources said, this latest sudden decision to discontinue gas supply has raised the chances of a price hike in the coming days.
On the other hand, farmers said that they had already started to feel the burnt, as dealers, on the account of less production, had already started fleecing them.
With improved supply of the locally-produced urea in the market, black marketing and hoarding can be controlled substantially and it would be a win-win situation for the farmers who are facing urea shortage, the sources said.
Meanwhile, all major farmer organisations of Punjab, including Farmers Associates Pakistan (FAP), Agri Forum Pakistan (AFP) and Kissan Board Pakistan (KBP) have criticised the government for suspending gas supply to the fertiliser plants, saying that this act will badly affect the wheat crop.
They also feared that this would lead to further price hike of fertiliser in the market that would badly hit the farming community.
Dr Tariq Bucha, President, FAP, said that despite spending millions of dollars on urea import, the government is unable to manage smooth and timely supply of urea to the farmers on reasonable prices.
He recalled that the government has imported around 1.45 million tons urea this year, which is highest-ever import of urea in the country in a single year. Despite this, he said, fertiliser shortage could not be bridged.
Ibrahim Mughal, Chairman, AFP, said that in an agrarian economy, the government should not undermine the importance of the farming sector.
Various anti-farmer steps, including urea shortfall, would result in serious dent in the productivity of various key crops, he added.
Sarfaraz Khan, Senior Vice President, KBP, said that the government should focus on domestic urea production, which is cheap and can easily be made available to the farmers against the imported urea, which cost heavily to the national exchequer in the shape of huge subsidy and foreign exchange.