Urea

KARACHI: Urea prices have receded on normalisation of gas supplies, says an industry source, quoting the early September price per bag at Rs1,600, from Rs1700 at the same time a month ago.

The supply of gas to fertiliser plants, which has been a nightmare for producers, was resumed five days earlier than scheduled on Sept 5, instead of Sept 10, said the source, who stated that gas supply to fertiliser industry with a reduced ATA (annual turnaround maintenance) of Qadirpur has helped pull prices down of the main fertiliser (urea).

He said that the manufacturers price of urea stood at Rs1,378 per bag and thought the dealers had reduced prices as a result of improved supply in the market on increased production. Yet many hoarders and dealers were making money by charging Rs150-200 over and above the manufacture’s price.” It is unjustified”, says Mahmood Nawaz Shah, the General Secretary of Sindh Abadgar Board, a growers advocacy group.

He said that the dealers were required to limit their commission to whatever was settled with the producers. He thought that on the price of Rs1,378, dealer commission should work out at around Rs40.

“Charging Rs150 to 200 was a rip off”, he asserted. The growers’ representative said that nine districts of lower Sindh, which cover the main sowing zones of Mirpurkhas, Hyderabad, Dadu, Nawabshah, Badin and others were all underwater due to floods.

Mr Mahmood Nawaz lamented that rains and flood had destroyed the entire Kharif crop.

He said it was essential to rein in the hoarders because when the demand soars for Rabi crop in winter, starting November, the urea prices could go up fast, impacting such essential crops as wheat and oil seed. The growers’ representative wondered how the gas supplier would meet industry demand for Rabi crops in winter when the domestic consumption also increases.

The industry source contended that gas shortage was expected to continue with winter load management increasing from 45 to 60 days.

He conceded that preference of gas needs to be given to domestic consumers over the fertiliser industry as per 2005 gas allocation policy and said that SNGPL was doing its best to supply gas to fertiliser sector.

”At the moment all four plants on the Sui Northern Gas pipeline (SNGP) network are getting 80pc gas” said the industry source, but added “It is unclear how long this will last.”

One option put forth was to bring industry to three days load-shedding as was originally planned by the government.

Regardless of the dismal situation, urea demand was still said to be high and selling more in the north.

Going forward, industry forecasts huge urea shortage at 0.9 million tons, which would be significantly more than what prevailed in the Kharif season. The Sindh Abadgar Group representative suggested that the government should work out the shortfall figures and begin import right away to bridge the gap between demand and supply.

He thought it would arrest the huge price rise, which otherwise would inevitably result from hoarding by dealers.