Ministry of Industries and Production sources confirmed that they have received reservations from domestic fertiliser industry on government”s decision to import 500,000 tons of urea which termed this decision based on unrealistic calculations.
While sources appreciated government”s seriousness to meet domestic urea demand of millions of farmers, he suggested that resources should not be wasted on importing extra urea in the country instead the same resources should be invested in some other productive activity for the economy. Sources said that given the demand and supply situation of urea for current Rabi Crop (October 2013 to March 2014), Ministry of Production has underestimated domestic production based on the availability of gas to fertiliser industry as conveyed by Ministry of Petroleum and Natural Resources. Sources believed that Production Ministry has worked out total domestic production at 2,208,000 tons. However, according to industry”s estimates the domestic industry will produce 2,572,000 tons of urea during Rabi months; hence industry will be able to supply over 350,000 tons of urea in addition to what was worked out by Ministry of Industries and Production while submitting the summary for approval of ECC. Industry sources said that fertiliser industry”s estimates for total Rabi off take is 3.00 million tons and provinces demand of 3.21 tons may be on higher side.
Based on these additional quantities of urea availability from domestic production (during Rabi crop), sources believe that import of maximum of 300,000 tons of urea will be more than sufficient to cater for Rabi crop demand and will also provide adequate buffer stocks. Any additional imports will be unnecessary burden on exchequer and also will require additional subsidies to match price of imported urea with domestic prices. In view of the above, sources demanded the government to review its decision to import 500,000 tons of urea for current Rabi crop as 300,000 tons will very comfortably meet the requirement.
Sources said that it”s not just the foreign exchange cost that national exchequer has to bear for importing urea, government also pays billions of rupees of subsidy on imported urea to match its prices with domestically produced urea, which is still far more cheaper than the imported urea. Country”s current urea production is 6.9 million tons but unfortunately domestic plants are not run continuously to meet the domestic urea requirements and government has to spend hundreds of millions of dollars each year to import urea for supporting the agriculture economy of the country.
Sources said that government should prioritise fertiliser sector for providing gas as all other industries have alternative fuel options except fertiliser sector that uses gas as raw material to produce key farm input, urea, for the farmers that ensure food security of the masses as well as provide raw material to important industries like textile and food processing.
Using gas for producing urea is the most efficient and judicious usage as fertiliser sector is not just burning the gas to run the plants alone, it offers maximum value addition by converting the raw gas into precious urea grains and country hugely benefits from this import substitution. Gas should be provided as priority to the sector which creates maximum value addition. Fertiliser is the only sector which has zero percent ratio of Unaccounted for Gas (UFG), it never defaults on its payment obligations to gas utilities which are positive for cash flow of SNGPL/SSGC. Fertiliser sector is also one of the highest tax paying sectors of the economy in private sector of Pakistan.
By producing urea locally, Pakistan is not only saving billions of dollars of foreign exchange annually but it is providing affordable urea to its farmers that helps in keeping crops production cost in control. In 2012 average between domestically produced and imported urea (without government subsidy) was Rs 1,015/bag (ex-GST).