REFERENCE article ‘Fate of surplus urea export hangs in the balance’” (Jan15). The writer, with reference to sources of the Ministry of Commerce, has quoted a proposal to export surplus 200,000 tons of urea, while manufacturers will have to remit Rs626 per bag on account of subsidised gas value.

The following points are highlighted to guard against misleading figures quoted in the report:

1. The current inventory stands at around 900,000 tons, thus allowing a minimum of 500,000 tons to be exported, while keeping enough strategic reserves. The quantity of 200,000 tons quoted in the article is too low to be worthwhile incentive to undertake such an exercise by the industry. Moreover, it will also not help in liquidation of the ever piling up inventory.

The amount of Rs626 per bag to be refunded to the government, on account of subsidised gas, is grossly exaggerated. However, it may be considered that gas prices for the fertiliser sector globally are much less than in Pakistan. In the Middle East, it is about $1.2 per MMBTU, as compared to $5 dollara in Pakistan. Moreover, the fertiliser industry is the only sector that carried out the value addition to the low-quoted gas. So, the taking away of the incentive on export will be highly unfair to the industry, rendering it non-competitive.

Export of locally-manufactured urea is not a very lucrative business at the moment. Current international prices of urea being about Rs1650 per bag, if matched by exporter, will at best lead to break even. Thus any disincentive, as mentioned in the article, will render the export option economically not viable.

The option to close the local industry to manage the inventory as suggested by the writer reflects lack of understanding of the fertiliser industry and may not be in the country’s interest.

The government should expedite the process of export with sufficient incentive and time to export to earn valuable foreign exchange for the country.

Name withheld on request

Lahore

Published in Dawn, January 23rd, 2017