Urea price likely to increase as Agritech halts production

LAHORE: The price of urea fertiliser may see a rising trend following closure of a manufacturing plant on natural gas shortages, which is basic raw material for producing farm compost.

The Sui Northern Gas Pipelines Limited (SNGPL) has formally informed the Agritech Limited (LNG) that Regasified Liquefied Natural Gas (RLNG) supply to the urea plant will be suspended from January 4, 2023 for an indefinite period.

The suspension of RLNG supplies was done in accordance with a decision taken by Economic Coordination Committee of the Cabinet (ECC), SNGPL informed. As a result, the company will be unable to produce urea now onwards.

Pakistan has already been facing shortage of urea and importing it to meet the shortfall. The closure of plants will further affect urea availability at national level in addition to increasing its prices.

“It is peak urea consumption time for wheat crop as very strong urea demand is being witnessed across all provinces. In such a situation, more imports of expensive urea would surely be required,” ' said an industry official.

The closure of urea plants would lead to increasing market prices to peak level for farmers, especially in Punjab and Khyber Pakhtunkhwa due to shortages, he added.

“It is feared that per bag price of urea could jump by Rs500 to Rs600 at retail levels.”

It may be noted that on November 15, 2022, the ECC allowed continuation of operations of Fatima fertilizer and Agritech Ltd plants on subsidised RLNG from October 2022 to December 2022.

The ECC considered a summary of the ministry of Energy, Petroleum Division on continuation of subsidised RLNG supply to the two plants and allowed their operations on subsidised RLNG from October 2022 to December 2022.

In October 2022, the ECC of the cabinet authorised the state trading agency to take steps for urea import, and also signed a contract with the Trading Corporation of Pakistan (TCP) for the lowest bid of $520 per tonne for the import of 300,000 tonnes of urea.

TCP floated an international tender on October 19, 2022 and it was opened on October 26. Among the three bidders, the lowest responsive bid was of $520 per tonne, which would cost the country $156 million. Moreover, Gwadar Port in the current week has begun the import of 200,000 tonnes of urea fertiliser for the government sector.