KARACHI, Jan 2: Fertilizer companies have increased prices by Rs16 per bag, which pushed up price of urea fertilizer from Rs479 to Rs495 per bag of 50 kg. Chief financial officer (CFO) of one of the four top fertilizer companies — who asked not to be named — confirmed to Dawn that the prices had been raised from Monday.

He said that the producers were constrained to pass on the impact of the enhanced gas tariff by the government to the farmers. On Saturday, gas prices for domestic and commercial consumers were increased by the government by 9.5 per cent and 15.51 per cent, respectively. But the market sources believe that the price rise has come ,too, fast and by at least Rs5 more than the actual impact of gas price hike on the urea producers.

Atif Malik, an analyst at Jahangir Siddiqui Capital Markets Limited, said in his early Monday report: “With respect to fertilizer companies, 15.51 per cent increase in fuel gas prices, (feed prices not changed), will bring the margins under pressure. The per bag impact on cost is worked out to be Rs10 to Rs11. We expect the fertilizer companies to pass on the increase in its input prices to consumers in the same ratio.”

The CFO at the urea producing company admitted that the real impact, exclusively, from gas price increase would be Rs10 per bag. But, he pointed out that the international prices of fertilizer had also doubled in recent times. According to the last figures released by the National Fertilizer Development Centre (NFDC), urea off-take in November, 2005 had declined by 20 per cent to 303,000 tons, compared to 504,000 tons in the same month of 2004.

The NFDC report mentioned that the shortfall in demand during November was speculative due to the expectations of increase in urea prices. But over-all urea demand for the first 11 months (Jan-Nov 2005) had increased by 12 per cent to 4.47 million tons compared to 3.98 million tons in 1994. Industry analysts expect the urea demand for full year to be 5.2 million tons, 8-10 per cent higher than the last year.

Despite increase in DAP prices, its off-take during November, 2005 rose by over 14 per cent to 249,000 tons against 219,000 tons during the previous year. The fertilizer company executive indicated market share of various leading producers as: Fauji (inclusive of Fauji Fertilizer (FFC) and Fauji Fertilizer Bin Qasim (FFBL) 60 per cent; Engro 20 per cent; Dawood Hercules 10 per cent and Pak Arab 10 per cent.

Tariq H.Khan, the analyst at Atlas Investment Bank, in a fertilizer sector report released on Monday recalled that it was emphasized in the meeting of Fertilizer Review Committee to maximize domestic production through un-interrupted gas supply to fertilizer plants, timely urea imports, priority berthing facility to fertilizer vessels and availability of railway wagons.

He believed that in spite of the imports, urea supply situation is expected to remain tight until a new plant comes on stream. But the senior executive of the urea producing company believed that it could take up to three years, until 2009, for another plant to be set up and commissioned.