ISLAMABAD: The fertiliser manufacturers have blamed expensive gas for higher urea prices in the country as compared to international rates.

In a letter forwarded to the Ministry of Industries and Pro­duc­tion on Saturday, they said if recent increase in gas prices was withdrawn the average price of fertiliser produced locally was still cheaper by Rs600-700 per 50-kilogram bag against imported urea.

“The GIDC [Gas Infrastructure Development Cess] on feedstock has been raised to Rs300 per mmBtu [million British thermal units] from Rs197 per mmBtu in 2011. And this is in addition to the GST,” said Waheed Hamid of Fauji Fertiliser, speaking on behalf of the industry. “This is in contrast to the fertiliser policy of 2001 which provides for keeping feedstock gas prices in line with the Middle East.”

He added that the average gas prices in the country were $5.4 per mmBtu for the fertiliser sector at present compared to $2.54 mmBtu in the Middle East.

The issue of high urea rates in the country also arose during a recent meeting of the National Assembly’s Standing Committee on Industries and Production, where it was alleged that urea manufactures would earn up to Rs30 billion in profits this year from poor farmers by charging an extra Rs250 on a bag.

Pakistan Tehreek-i-Insaf MNA Asad Umar, the chairman of the committee, suggested that the government should rather import cheap urea and flood the markets. “Farmers don’t have the financial capacity to buy urea,” he said.

Research analysts say manufacturers raised the price of urea in February this year by around Rs25 per bag in line with the gradual increase at international prices.

“There is complication in this regard. While gas prices in Pakistan for the fertiliser sector were still higher than the Middle East markets, the urea prices were comparatively lower,” said Taha Khan of Alfalah Securities.

“The price of imported urea will cross Rs2,000 per bag due to transportation cost when it reaches Punjab.”

International urea prices plunged to $298 per tonne (around Rs1,600 per bag) in January 2016 from $472 (Rs2378 per bag) in the beginning of 2015.

The urea off-take has been in decline for some months despite decrease in its prices, Mr Khan said.

“But this is mainly because of low markets rates for farm produce such as rice and even cotton, and the farmers are facing cash crunch in buying urea.”

At the same time, the fertiliser industry in its letter to the Ministry of Industries has said that the way forward out of the current crises was to further reduce locally manufactured urea prices by rolling back the GIDC and reducing the gas feedstock price.

Published in Dawn, March 13th, 2016