Planning Commission has accused Finance Ministry of delaying financial arrangements for the import of urea from the international market, which is one the reasons for the increase in prices in the local market, sources close to Chairman TCP told Business Recorder.
Economic Co-ordination Committee (ECC) of the Cabinet is expected to decide on Thursday (tomorrow) whether Ministry of Industries and Production or Ministry of National Food Security and Research (NFS&R) would be assigned the key role in the import of urea.
Giving the background, the sources said, during presentation to ECC on “Review of Key Economic Indicators” by Secretary, Ministry of Finance on 7th September 2013, the issue of fertilizer supply/demand situation for Kharif 2013 was discussed and it was noted with concern that severe problems/ issues are being faced in import and distribution of fertilizer. The ECC of the Cabinet directed that “Secretary, Ministry of Planning, Development and Reform to review the problems/issues/hurdles being faced in import of fertilizer, its distribution to the end users, and suggest a way forward in consultation with the MOIP and Trading Corporation of Pakistan (TCP).
In light of the ECC”s decision, three detailed meetings were held with concerned ministries/organisations and related stakeholders to identify and examine the issues for suggesting an appropriate way forward. Member (Food & Agriculture), Planning Commission, Chairman TCP, GM NFML and representatives of Ministries of Finance, Industry and Production and National Food Security & Research (NFS & R), participated in discussions.
Fertilizer is a vital input in crop production system. Contribution of balanced fertilisation towards increased yield ranges from 30 to 50 percent in different crop production regions of the country. Almost all soils in Pakistan are deficient in nitrogen; 80-90 percent in phosphorus and 30 percent in potassium. Nitrogenous fertilisers ie Urea, Nitrophos (NP), Calcium Ammonium Nitrate (CAN) and NPK (blend of different fertilisers) are used to overcome the nitrogen deficiency. Phosphatic fertilisers like Di-ammonium Phosphate (DAP), Mono-ammonium Phosphate (MAP), Triple Super Phosphate (TSP), Single Super Phosphate (SSP), NP and NPK are used to overcome phosphorus deficiency whereas Sulphate of Potash (SOP) and Muriate of Potash (MOP) fertilisers products are used for potassium deficiencies. The most commonly used fertilisers in Pakistan are Urea and DAP accounting for 85 per cent of total fertilizer consumption in country.
Pakistan has the potential to produce annually up to 6.3 million tonnes of Urea. There are nine urea plants in the country. Out of these, four plants viz Dawood Hercules, Pakarab Fertilizer, Agritech and Engro Fertilizer (new) plant are based on Sui Northern Gas Pipelines (SNGPL) network; while four plants namely, Fatima Fertilisers, Engro (old) and two plants of Fauji Fertilizer are based on Mari Gas Company network. Fuji Fertilizer plant located at Bin Qasim (Karachi) is at Sui Southern Gas Pipelines Limited. Due to gas curtailment policy of the Government since May 2010, local urea plants are operating at less than 80 percent of their installed capacity and during fiscal year 2012-13, domestic urea production remained around 4.2 million tonnes. The gap between supply and demand is met through imports. After imposition of gas curtailment policy for urea plants, there was sharp hike in the prices of urea from Rs 880/- per bag in May 2010 to Rs 1,810/- per bag in October 2013. In case of continuous gas curtailment of urea plants, the government has to import the urea from international markets to meet the domestic requirements.
Imported urea price is subsidised for keeping at par with the price of locally produced urea mostly to benefit the farmer community. At present, the market price of domestic urea is Rs 1,850/- per 50 kg bag whereas the price of imported urea is fixed at Rs 1,600/- per 50 kg bag. However, the benefits of subsidized low prices do not fully pass on to the deserving farmers. According to TCP, a bag of imported urea currently costs Rs 2,500/- which includes payment to supplier, 17 percent General Sales Tax (GST) and 1 per cent Income Tax and other charges, etc.
TCP is bearing incidental charges like duties and taxes, insurance etc paid from urea overdraft (OD) account. On the issue of delay in payments by NFML to TCP for the urea imported through TCP the representative from NFML explained that presently the selling price of urea in the country is Rs 1,600/- per bag, while NFML is lifting urea from TCP at Rs 1,331/- per bag. The difference of Rs 269/- is charged by NFML for: Rs 216/-inland/upcountry transportation charges; Rs 21/- incidental charges of NFML and dealer margin and, Rs 32/- as cost of empty bag procured by NFML.
During the meeting the price structure of TCP and NFML including freight, incidental charges and demurrage charges were discussed in detail. At present, the ex-mill price of domestically produced urea is about Rs 1,722/- per bag of 50 kg, which includes the factory gate price ie Rs 1,165/- per bag plus Rs 300 as Gas Development Surcharge (GDS) + 17 per cent GST + 0.5 per cent as Withholding Tax.
National Fertilizer Development Centre (NFDC) is maintaining fertilizer related database since the early fifties. It covers the information on fertilizer availability, production, imports, prices, export, off-take and long/ short term forecasting along with agronomic impacts studies based on actual research. NFDC also provides technical assistance/ relevant information to MOIP, NFS & R, Finance as well as other national and international organisations and NFDC regularly publishes “Monthly Fertilizer Review Report” covering each and every aspect of fertilizer including supply and demand situation at national and provincial level, outlook for coming Rabi or Kharif, to be used by policy planners, importers etc.
The following main issues were identified during these meetings: (i) delay in assessment and lack of proper inter-agency co-ordination, and planning for timely import of required quantity of urea leading to issues like demand for relaxation of Pakistan Procurement Regulatory Authority (PPRA) rules and delay in replenishment of stocks etc; (ii) unscheduled gas curtailment to urea plants results in delayed import planning; (iii) delay in payments by National Fertilizer Marketing Limited (NFML) to TCP on account of received imported urea; (iv) delay in financial arrangements by Ministry of Finance for opening LC for payments to purchase urea from international market by TCP; (v) possible manipulation between imported and domestic urea as there is difference in prices; (vi) delay in lifting of imported urea by NFML from port due to limited capacity of transport contractors; (vi) problem of insufficient as well as inefficient dealers” network of NFML for distribution/sale of imported urea in country; and (vii) lack of proper storage facility for imported urea at Gwadar port.
After detailed deliberations on various issues, the following recommendations are made for consideration and approval of ECC of the Cabinet: (i) Ministry of National Food Security & Research should assume its lead role of co-ordination, particularly need assessment and planning the import/procurement of urea in time and smooth distribution process as it was done by MINFA in the past; (ii) assessment of fertilizer requirement (urea) may be done for five major crops (Kharif and Rabi crops) on roll over basis and a minimum of 0.2 to 0.3 million tons of buffer stock be maintained to meet the emergent needs in peak demand periods. NFDC, Ministry of Planning, Development & Reform will provide full support and information to relevant Ministries; (iii) Ministry of NFS&R and MOI&P may arrange a meeting at ministerial level for transferring function of Fertilizer Review Committee (FRC) meetings from MOI&P to NFS&R; (iv) FRC meetings to be held on a monthly basis especially during peak season to monitor the demand/supply situation along with other relevant issues. NFDC will provide relevant data to FRC; (v) there should be no curtailment of gas to urea plants during summer and maximum fertilizer production may be obtained to reduce the quantum of import; (vi) Ministry of NFS&R, Ministry of Commerce through TCP and MOIP through NFML to review critically the urea import and distribution cycle to curtail its time and make it more efficient; (vii) Ministry of Finance, Ministry of Commerce, MOIP, TCP, and NFML to resolve the pending issues about finances and subsidy within two months through reconciliation of accounts and hold quarterly meetings in future; (viii) NFML to make adequate arrangements for lifting of imported urea on a fast track basis and for provision / establishment of appropriate storage facilities in consultation with the Governments of l3alochistan and Sindh; and (ix) MOI&P will ensure the printing of Maximum Retail Price (MRP) on all fertilizer bags either locally manufactured or imported by public or private sector. MOI& will take all necessary steps including the approval of ECC of the Cabinet in this regard.
Business Recorder
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