Islamabad:
The government on Friday approved the import of 100,000 metric tonnes of fertilizer at $359 a tonne, but rejected a proposal for a subsidy of Rs 5.9 billion to match local urea prices – in a move that will bridge the deficit but disrupt the market prices.
The Economic Coordination Committee (ECC) of the cabinet took the decision to import urea while rejecting the subsidy request of the Industries Ministry. Finance Minister Muhammad Aurangzeb presided over the ECC meeting. “The ministerial committee approved the proposal of the Ministry of Industries and Production to import 100,000 tons of urea,” the Ministry of Finance said in a statement.
“This decision is aimed at ensuring adequate supplies of urea in the market,” he added. “This will also ensure stability in fertilizer prices during the crop sowing season.”
In May this year, the ECC had decided to import 200,000 metric tonnes of urea through competitive bidding and on a government-to-government basis.
The Trading Corporation of Pakistan (TCP) has floated a tender to import 150,000 tonnes of urea, which opened on Monday. He informed the ECC that six bids were received with the lowest bidder being West Trade International of the UAE.
The UAE-based company offered a price of $359 per tonne, which was quite high compared to the cost of previous imports, but was the lowest price among the offers made by the bidders.
The industries ministry told the ECC that the price of imported urea will be Rs 7,332 per bag, including transportation and handling charges of government agencies. A subsidy of Rs 2,932 per bag was needed to match local prices. However, the finance minister refused to provide any subsidy on the condition that there were no funds in the budget and last year the government had not paid any subsidy on imported urea.
The industries ministry had sought a subsidy of Rs 5.9 billion to keep prices of imported urea in line with the local market. Excluding transportation and handling charges, the price of imported urea was Rs 5,832 per 50 kg bag, the ECC was informed.
The ministerial committee also did not approve another proposal suggesting government-to-government negotiations to find other cheaper sources of urea import. The meeting was told that government-to-government negotiations were held with Malaysia and Azerbaijan, but both countries offered higher rates compared to the competing offer. Negotiations with Turkmenistan to purchase urea on a government basis and efforts to obtain approval from China were also ongoing.
The ECC was informed that the country may not need to import further urea provided Punjab-based fertilizer manufacturers procured imported gas. If gas supply is suspended to these units during the Rabi sowing season, there would be a shortage of 351,000 tonnes.
The ECC has asked the industries ministry to find a solution to keep supply of fertilizers stable to meet crop requirements.
The Department of Industries has not released its summary for comments from relevant agencies despite opening the tender five days ago.
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