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ISLAMABAD: The government on Monday allowed the long-awaited export of 300,000 tonnes urea fertiliser without the Rs200 per bag subsidy being extended for sales to local farmers.
The decision was taken at a meeting of the Cabinet’s Economic Coordination Committee (ECC) presided over by Finance Minister Ishaq Dar.
The move aims to partially offload substantial surplus stocks built through domestic production with subsidised gas and public sector imports.
The ECC also formally endorsed the Jan 13 decision of Prime Minister Nawaz Sharif to continue sale of fertilisers to farmers at subsidised rates.
“In pursuance of the prime minister’s decision, the ECC endorsed continuation of the previous fertiliser subsidy scheme for 2016-17 on the same terms, conditions and modalities,” an official statement said.
The government is paying Rs200 per bag subsidy to support the farming community and agriculture sector.
The export of 300,000 tonnes of urea fertiliser will be allowed till April 28, 2017 without the abovementioned subsidy.
The export quantity will be monitored by the State Bank of Pakistan in a similar mechanism adopted for sugar exports.
The Fertiliser Review Committee (FRC) was directed to monitor domestic prices of urea on monthly basis following the weekly sensitive price index and recommend to the ECC discontinuation of further exports in case of abnormal increase in retail price.
The finance minister said the permission for urea export was given in view of around one million tonnes of surplus commodity available in the country. It is expected that international fertiliser prices – which are now beyond $255 per tonne – would help offload the 300,000 tonnes urea approved for export.
Earlier this month, the government had withdrawn subsidy on fertiliser sales by the private sector to local farmers saying the Rs27bn subsidy earmarked for the year had been exhausted while sufficient stocks are still lying with fertiliser companies and the National Fertiliser Marketing Limited (NFML).
The decision was overturned by the prime minister on the request of Punjab Chief Minister Shahbaz Sharif for loss of agricultural support. It was reported to the ECC that about 300,000 tonnes of imported fertiliser was lying unsold with the NFML because of price advantage being enjoyed by the private sector.
It was reported that it had become a challenge for the NFML to compete with private fertiliser producers who were not only utilising the subsidy but also other price competition tricks to get rid of their surplus stocks built over the past few months owing to continuous supply of liquefied natural gas (LNG).
The ECC was informed that fertiliser prices had dropped by almost one-third to Rs1,200 per 50kg from Rs1,785 in August 2016. While scaling down urea prices to Rs1,310 per 50kg in August, the ECC had empowered a secretarial committee to suggest measures to trigger sale of NFML’s imported urea. The committee advised the price to be fixed at Rs1,100 per kg but it was set at Rs1,200per kg in the last week of Sept 2016.
The ECC was also informed the fertiliser industry had a surplus of almost 1.6 million tonnes of urea in Rabi 2016-17 because of carryover inventory from Kharif 2016. This created adverse market conditions for the NFML which sold less than 15,000 tonnes between August and December.
The ECC was also informed that the industry had sold about 2.2m tonnes of urea against estimated off take of 3.3m tonnes for Rabi 2016-17, leaving a surplus of more than one million tonnes. The NFML was required to offload about 270,000 tonnes but it could sell only 15,000 tonnes.
The ECC directed the Pakistan Agricultural Storage and Services Corporation (Passco) and the Ministry of National Food Security and Research to reconcile outstanding claims on account of wheat supply in 2008-09 for payments. The claims are estimated at about Rs25bn and have been the subject of audit objections for many years.
Published in Dawn January 24th, 2017
