Domestic urea price posted a sharp increase of 22 percent to Rs 1,740 per 50-kg bag during the last calendar year mainly due to gas curtailment and rising cost of doing business. Industry sources said on Tuesday that the price of urea, an essential raw material for the crops, witnessed a massive increase during calendar year 2012. They attributed the huge increase to short supply of gas to domestic urea industry and imposition of Gas Infrastructure Development Surcharge (GIDS).
However, they claimed that out of the total increase in urea price, about 50-60 percent was the result of GIDS and general inflation including increase in gas and power tariff. While, remaining increase was due to gas curtailment as the government did not honour its gas supply contracts with the fertiliser manufacturers.
With the surge, average urea price mounted by Rs 320 to Rs 1,740 per 50-kg bag in the domestic market. The sources said that upward trend in domestic urea prices was likely to remain during the current year, if gas was not supplied as per requirement. Meanwhile, urea off-take registered a negative growth of 12 percent during the last calendar year owing to rising prices followed by gas curtailment. During CY12, overall urea off-take fell to 5.2 million tons as compared to 5.92 million tons in CY11, depicting a decline of 12.16 percent or 0.72 million tons.
They said that higher commodity price followed by short supply of gas to the domestic urea plants resulted in sharp decline in the off-take of urea in the local market. Although, the government had taken several steps to avoid shortage of urea, however it, reportedly, failed to control prices. In order to ensure cheap availability of urea, the government also spent billions of rupees on subsidy of imported urea to maintain its prices at reasonable level.
In addition, DAP off-take registered a growth of 6.2 percent to 1.19 million tons during the last calendar year. DAP price witnessed a slight increase of 2 percent to Rs 3,946 per 50-kg bag in the domestic market. Analysts said that with low production of fertiliser on the local front, as a whole the local industry was losing its share in the market to rising imports. Urea lost its market share by some 0.4 percent to 79 percent, while local DAP reduced its contribution in total sales volume by 0.7 percent to 51 percent during CY12.
During CY12, urea production witnessed a decline of 15 percent due to gas curtailment, particularly to plants running on the gas supply network of Sui Northern Gas Pipelines (SNGP). While, performance of urea plants, getting gas from Sui Southern Gas Company, was much batter during the period under review.