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ECC sets imported urea price at Rs1,712 per bag

Updated December 18, 2018

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The government has been bearing a significant cost of imported urea. After the new price fixed by ECC, the subsidy will come out to be Rs845 per bag.
The government has been bearing a significant cost of imported urea. After the new price fixed by ECC, the subsidy will come out to be Rs845 per bag.

ISLAMABAD: The Economic Coordination Committee (ECC) of the Cabinet on Monday fixed the price of imported urea at Rs1,712 per 50kg bag and put certain restrictions on export of ethanol to control tax evasion.

The ECC meeting, presided over by Finance Minister Asad Umar, set the urea price on the recommendation of Fertiliser Review Committee (FRC) that met earlier in the day.

The FRC, headed by Adviser to Prime Minister on Industries & Production (MoIP) Abdul Razak Dawood, was told that the price of local urea in the domestic market varied between Rs1,820-1,850 per bag and was much higher than desired level. A top official of the ministry said the chief secretaries of the provinces had been asked to crack down against hoarding and black marketing and bring the commodity in the market.

However, the fertiliser stakeholders opposed the crackdown and requested the governments to let their own channels overcome the challenge to avoid a sense of harassment. The meeting was also explained that initial supply gaps had also emerged after the imported product reached the port on Dec 2 but could not be released for few days due to capacity constraints and in the absence of price fixation.

On the question of delayed price fixation of imported urea, it transpired that a summary moved on the request of National Fertiliser Marketing Company (NFML) to the Secretary Finance on Dec 6 was reportedly returned the same day with consent but could not be presented to the ECC for Dec 12 meeting due to mysterious reasons.

This time lag coupled with gas shortfall over the following week also helped speculators take undue benefit with fears that gas constraints could create fertiliser shortage. An official said the FRC recommended the price of imported urea at Rs1,712 per bag against a request of the MoIP that suggested the price should reduced by Rs52 per bag to Rs1,660.

The meeting was informed that prevailing market price was now Rs1,820 per bag even though sufficient stocks were available. It was also reported that 50,000 tonnes imported stocks from NFML had been released in the market and remaining 50,000 tonnes had also reached Karachi. The ECC had ordered import of 100,000 tonnes on Sept 10 through Trading Corporation of Pakistan (TCP) to avoid anticipated shortage for the Rabi crop.

The TCP reported that the cost per 50 kg bag, excluding NFML charges (Rs21 per tonne), stood at Rs2,556 per tonne. NFML had suggested that dealer booking price of imported urea be lowered by at least Rs100-150 than local urea brand price. The government will have to pick a Rs845per bag subsidy.

Informed sources said the FRC was also requested by fertiliser companies to take an early decision on utilisation of 66mmcfd gas of Mari Deep to fertiliser sector in view of expected future requirement. In a recent meeting, the ECC had allocated this gas to Mari Petroleum but had declined to allow it set up a 180MW power plant.

The ECC also approved a proposal of the Ministry of Commerce to amend the Export Policy Order (EPO) 2016 to the effect that the export of ethanol be made subject to the condition that case molasses used in its production is either produced in house or purchased directly from the sugar mills.

It was reported by the FBR that cane molasses was a major by-product of sugar industry and was either exported by the industry, sold locally or consumed in house for producing ethanol, more than 95pc of which was exported. Although export of ethanol was accounted for, the sale and purchase of cane molasses was not fully documented. It proposed the production and sale of the molasses be properly recorded so that it can be used as an indicator to gauge the production of sugar and thus assist in the collection of due taxes.

It was, therefore, proposed that the EPO be amended by adding an entry in Schedule II to the effect that export of ethanol and other products manufactured from cane molasses shall be subject to the condition that “the molasses used in production of ethanol and other products manufactured from it being exported is either produced in house by the exporter or purchased directly from a sugar mill.”

Published in Dawn, December 18th, 2018