Urea prices jacked up by Rs100/bag

LAHORE: Farmers on Monday expressed serious concerns after fertiliser manufacturers jacked up the price of urea by Rs100/50kg bag, apparently over the government’s failure to clear the unpaid subsidy worth around Rs20 billion.

This is a single major jump in the price of urea after about a similar but gradual increase of approximately Rs90/bag recorded between October 2017 and April 2018, registering almost 15 percent rise accumulatively in the cost of this major agriculture input. After the latest increase the urea will now be sold at around Rs1,500/bag.

The federal government has also withdrawn fertiliser subsidy for the next fiscal, making it a provincial subject. “Withdrawal of subsidy means reversing all the measures one by one that were taken earlier for reducing cost of production of growers,” Khalid Mehmood Khokhar, president Pakistan Kissan Ittehad, said.

Khokhar warned that an increase in urea price would directly affect the yield of crops, especially cotton, wheat, and rice. “The fertiliser manufacturers have no right to increase price of urea unilaterally, he observed urging the government to immediately withdraw price hike otherwise they would be forced to start agitation against government’s anti-farmer steps.

It must be noted that the previous (around Rs80-Rs100/bag) increase in urea price was a result of a supply-demand gap. With the latest surge in urea price, the operational fertiliser manufacturing plants would be able to recover the ‘lost’ subsidy amount in a move to boost their books just before end of the current fiscal year.

The market insiders insisted that Monday’s price hike was not a part of an underhand deal between government and manufacturers to recover subsidy amount. However, official quarters were yet silent about this price escalation.

Sarfraz Khan, vice president Kissan Board Pakistan, also castigated the government and urea manufacturers for this major increase. “Urea utilisation as fertiliser has been high, which is a good omen for productivity of crops, but increase in price will discourage farmers to use this important input, resulting in low output,” Khan said.

Experts said leaving subsidy to provinces would complicate the whole matter as except Punjab, no other province would be able to implement subsidy scheme. Moreover, provincial subsidy means multiple pricing in different provinces.

Brig (Retd) Sher Shah, Executive Director Fertiliser Manufacturers of Pakistan Advisory Council confirmed that Rs100/bag increase has been made in price of urea. “The federal government was not fulfilling its commitment of paying huge subsidy amount and manufacturers were left with no option but to raise the price,” Shah said.

Analysts said urea sales were expected to increase 50 percent to around 375,000 tons in April 2018, compared to 250,000 tons in same month last year, while DAP sales were likely to drop 27 percent.

Saqib Hussain, an analyst at Sherman Securities, said the higher urea growth can be attributable to pre-buying by dealers due to expected hike in urea price amid abolishment of cash subsidy and chances of near term imports (which is costlier than local urea price) due to lower urea availability.

It is estimated that current urea inventory (as at April’ 18) is around 340,000-360,000 tons. The brokerage report also said sales of DAP during April were likely to reach 70,000 tons compared to 96,000 tons, falling 27 percent year-on-year.

Shankar Talreja at Topline Securities said urea off-take was likely to post growth due to early procurement by dealers/farmers in the wake of its short supply and anticipation of rise in urea prices, as talks on removal of urea subsidy were hovering around in April.