AS imports have been delayed, subsidy mode is yet to be decided and domestic production is still a matter of debate, Punjab braces for a tough fertiliser situation this rabi.
All early signs suggested that the domestic shortfall might range between 30-35 per cent of the total requirement, and the import of 185,000 tonnes decided by the Economic Coordination Committee of the cabinet (ECC) will still leave a big gap between supply and demand. It is feared that urea price may shoot beyond Rs2,000 per bag, and that of Di-Ammonia Phosphate (DAP) even more.
The genesis of the potential problem lies in the historical consumption pattern during the rabi season, when the country needs around 3m tonnes of urea. With a carryover of around 200,000 tonnes from kharif crop and domestic availability of of around 2.4m tonnes, the supply might still fall short by 415,000 tonnes.
The ECC’s decision to import 185,000 tonnes of urea needs almost 90 days to get fully implemented, including placing orders, opening letters of credit, coordinating shipping processes, port handling and inland transportation; another two weeks might be added to the timeline if port is Gwader, instead of Karachi. The country needs both fertilisers (urea and the DAP) by end November or early December.
The ECC on Saturday decided to import 185,000 tonnes of urea, which needs almost 90 days to get fully implemented, including placing orders, L/C opening, arranging shipping, port handling etc.
Another layer of urgency is added to the situation by the current floods. They have so far touched just under 3m acres of crops. Of these, they swept crops on over a million acres, where the farmers might go for early sowing rather than waiting for the damaged crops to re-grow. Wheat being the only next option in rice and cotton zones, this will inaugurate the rabi season early and so would be fertiliser application. Thus, instead of December, the fertiliser demand may rise by mid or late November.
Making the position more volatile is the domestic urea production which is still a matter of debate. The government earlier had estimated it at 2.2m tonnes. The industry says that some of the plants, not part of the earlier calculations, are receiving gas now and producing fertiliser. Four units, which are getting gas right now can add 200,000 tonnes provided they continue getting it for the rest of the season.
As far as DAP is concerned, no importer is ready to risk placing orders because the federal government has not come up with mechanism to utilise its promised subsidy amount of Rs15bn. Punjab alone needs 570,000 tonnes of DAP, which is facing an uncertain season because of official inability, or unwillingness, to firm up subsidy plans. Though most of the importers are now convinced that the government would not go for subsidy, they are not ready to place import orders because of financial risks.
If exports are not expedited, the prices of fertiliser will spiral because of huge deficit and the sowing may be delayed.
Published in Dawn, Economic & Business, September 29th, 2014
Dear visitor, the comments section is undergoing an overhaul and will return soon.