‘Farmers get Rs370bln benefit on urea in 5 years’

LAHORE: Local urea manufacturers claimed they passed on a price benefit of Rs370 billion to the farmers during the last five years, an industry official said on Tuesday.
Against Rs370 billion price benefit, the producers have received only Rs123 billion from the government as gas price benefit since 2010, providing Rs247 billion or 66.7 percent higher benefit to farmers on purchase of fertiliser, industry stakeholders claimed. They asserted this to dispel the belief that urea manufacturers are reaping the fruits of government incentives like gas price benefits, etc, at the expense of agriculturists. The local manufacturers have long been under fire for having substantially increased urea price during the last five years.
“It is true that urea prices have increased more sharply in the 2010-2015 era. But the question is, how much of the blame should be parked at the gate of producers,” said an official at one of the country’s leading urea fertiliser manufacturing companies. Requesting anonymity, the official said the prices of urea have gone up by 59 percent or Rs1,063 per bag over the January 2010 level. The freshly implemented GIDC and GST on urea has contributed an increase of Rs642 per bag. Rest of the increase is attributable to the higher gas price notified by Ogra, coupled with inflationary adjustments at the rate of 7.5 percent, which remained below the average inflation of 9.2 percent during this period, he added.
The official further said that while the difference between international and domestic prices had narrowed down in recent years, it still remains noticeable at Rs359 or 20 percent in the per bag price of agriculture input.
If we look at history, there was a time when the urea price discount ranged between 30-50 percent while the domestic feed gas prices stood well below the global average. Presently, with all levies, the country’s feed gas price is $4.2 per mmbtu compared to April 2015 Henry Hub gas price of $2.58 per mmbtu. “Despite that the price of domestically-produced urea stands cheaper than that of international,” the producer asserted.
He lamented that the fertiliser manufacturers were wrongly being accused of collecting the benefits of low-cost gas feedstock which was meant for the farm sector. “This is untrue and not supported by any evidence,” he insisted, adding that the above-mentioned discount of domestic urea prices to international was self-evident.
As far as regulations go, urea import is already a deregulated matter and there is no bar on bringing in imported urea and selling it in the domestic market. The reason it is not being done is because it is economically unfeasible for any importer to sell imported urea at parity with the price set by local producers. The official went on to say that a fertiliser policy, which is to be based entirely or largely on import-based supply, was a fallacious idea. The move, he viewed, would adversely impact the country’s ability to ensure domestic food security. “What would happen if we enter another commodity spike era?” he posed a question.
The industry stakeholder termed such move counter-productive, saying the food security of the country could be threatened if the policy-makers tried to expose the welfare of farmers. “What if international urea prices cross the $500 per ton fob mark? And it has happened in the past,” he reminded the proponents of urea imports deregulation.