‘Reaping benefits’ of Rs 77 billion subsidy: urea producers accused of 87 percent price hike

The Ministry of Industries (MoI) on Friday accused local urea manufacturers of increasing prices by 86 percent against a 37 percent hike in gas price, besides reaping benefits of a subsidy of Rs 77 billion over the past four years. This was the crux of a meeting of the National Assembly’s Standing Committee on Industries, which met with Dr Abdul Wahid Soomro in the chair. 

“The government extended (a subsidy of) Rs 77 billion to local urea manufacturers in (the past) four years, but they did not pass it on to farmers. Three urea manufacturers – Dawood, Engro and Fauji – are calling the shots,” said Chairman of National Fertiliser Corporation of Pakistan (NFC) Rizwan Mumtaz Ali. Secretary of Industries Shafqat Naghmi endorsed the viewpoint of the Chairman NFC. 

In reply to a question, he said that the government was selling imported urea to farmers at a price 15-20 percent lower than locally manufactured urea. The Secretary Industries clarified that 80 percent of gas supplied to urea plants was used as raw material and only 20 percent was meant for other purposes. 

Answering a question by Parliamentary Secretary for Commerce and Member of the Standing Committee Noor Alam, the Secretary Industries said that local output of urea was sufficient for domestic needs, but since local urea plants had been supplied with 37 percent less gas then their total requirement, urea production had also been cut by 37 percent. He said that the price of imported urea was Rs 2,800 per bag and the government was providing it to farmers at Rs 1,600 per bag. 

He argued that the Ministry of Industries had take-up the issue of gas supply with the Ministry of Petroleum, but there was negligible progress, as urea plants on Sui network were not being supplied gas. However, plants on Mari Gas Limited were getting full supply. Answering a question raised by Javed Iqbal Warraich, the Secretary Industries acknowledged that urea was being smuggled, but the issue was being handled by the Ministry of Interior or the government of Khyber Pakhtunkhawa (KPK).

In reply to another question, he said that printing of price on urea bags had been an issue for a long time and he, as the Secretary of the ministry for agriculture (now devolved) had raised it on various occasions. According to him, at a recent meeting presided over by the Prime Minister, Raja Pevez Ashraf, it had been decided that local urea manufacturers would print price on bags, but confided that the decision had not so far been implemented. 

The Chairman NFC assured the committee that the government would soon start printing price on imported urea bags. A Committee Member, Noor Alam Khan, expressed concern over the quality of urea, saying his field workers had to use hammers to break solidified pieces of urea and claimed that the price of locally manufactured urea was not more than Rs 500-600 per bag, but it was being sold at Rs 1,600-1,700 per bag. 

The Secretary Industries clarified the position of his Ministry, saying that it had no role in checking urea price and quality. “Our role is to ensure availability of essential items. We cannot control prices or check quality. It is the responsibility of provincial governments,” Naghmi said. 

Regarding the inquiry into urea scam being conducted by the Federal Investigation Agency (FIA), the incumbent Managing Director of National Fertiliser Marketing Limited, a subsidiary of the Industries Ministry, said that the agency had taken over the official record of urea distribution, but the inquiry was not yet complete. He said one of his successors, a retired Brigadier, had been removed whereas the former MD, Mian Ijaz, who is a civil servant, had been posted in Islamabad. 

The Chairman NFC said that with the privatisation/ handing over of fertiliser units of NFC, the control of government on price of fertilisers, especially urea, had weakened. As a result, price had rapidly surged. According to him, the price of urea increased by 248 percent to Rs 1,650 from Rs 475 per bag in 2005. 

During Rabi 2011-2012, NFML transported/ distributed 722,000 tons of imported urea. Historically, such a huge quantity had never been handled in such a short time. Since August 2008, the average daily dispatches were around 3,350 tons which increased to 11,300 tons because of NFML efforts. 

Copyright Business Recorder, 2013

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