Ongoing urea crisis

Published January 14, 2022

OFFICIAL claims notwithstanding, growers in many parts of the country continue to face problems in procuring urea or pay a premium on their purchase as conceded by the Fertiliser Review Committee. That the crisis continues to linger despite a significant increase in daily supplies from 342,000 bags to 440,000 bags confirms that the real causes — smuggling and hoarding — responsible for the shortage are yet to be tackled effectively. The prime minister’s orders for stern action against hoarders and profiteers as well as smugglers indicate that the crisis is far from over. The committee has expressed confidence that the enhanced supplies will boost the fertiliser’s retail availability, stabilising its market in the coming days, but the growers remain sceptical as is reflected by their panic purchases at a higher price to meet their needs over the next several weeks. Despite recent government actions to improve urea’s availability by providing uninterrupted gas supplies to the manufacturers and importing 100,000 tonnes of chemical from China, the crunch could extend beyond the wheat season.

Multiple factors — additional demand on better farm incomes, more rains, increase in the area under cultivation as well as hybrid varieties, smuggling, hoarding, etc — are blamed by the government and the industry for the domestic shortages and spiralling prices of one of the most essential farm inputs. This was despite record local production of 6.34m tonne fertiliser in 2021 against the annual average of around 6m tonne for the previous three years. What went wrong? In spite of signs of emerging shortages and warnings sounded by the wheat farmers and the urea industry as early as September, the government did not act to prevent an avoidable crisis. Even reports of nearly 343,000 tonne urea ‘vanishing’ from the market — presumed to have been smuggled out of the country — failed to budge the authorities. No effective measure was taken to stop smuggling to Afghanistan despite evidence. When raids began to be carried out on urea dealers’ premises to release ‘hoarded’ stocks, the crunch worsened as it spread panic in the market. In short, the urea crisis — similar to the sugar and wheat flour troubles in 2019 — is the outcome of the authorities’ inability to correctly forecast the demand-supply situation and take timely action. The urea crunch will ease in the next few weeks. But there are ample chances of it resurfacing if supply chain reforms are not implemented and governance not improved.

Published in Dawn, January 14th, 2022

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