With the supply side jumbled up, the urea market is operating on four different prices, marked by erratic behaviour.

There are four officially-declared prices — Engro, Fauji and Fatima Fertilisers selling at Rs1,600 per bag, Dawood Hercules at Rs1,750, Agri-Tech at Rs1,800 and National Fertiliser Marketing Ltd. at Rs1,300 per bag.

It was only last week that Fauji and Fatima increased their product price to Engro level. The reason for this increase and differential is the varying impact of gas shortage.

While gas shortage has impacted various manufacturers differently given the condition of their plants, calculations about financial impact due to shortages is purely their own, and so is their decision to increase price. How did the impact vary so much to create a difference up to Rs500 per bag, the industry needs to explain.

However, the government has much more to explain for what is happening. Who has rigged the gas distribution policy? Why has it not heeded the calls for early import of urea to meet the domestic shortage? Why is it watching price spiral as an uninterested spectator? Has it checked the calculations made by the industry before increasing urea price? Why it has left the farmers completely at the mercy of so-called market forces (read market manipulators), and that too for wheat season that could threaten food security? All these questions beg for official answers.

As far as urea supply is concerned, there does not seem to be much hue and cry either on the supply side or on its price because of agronomical realities. The month of October is considered to be “thirteenth month” because no urea is needed this month as there is no major crop on the field. Thus, the farmers are neither purchasing it nor raising hue and cry.

But, every fertiliser market watcher and farmer knows that it is just a lull before the storm. Of the entire Rabi demand, December alone needs around one million tons of urea, and a stock of around 200,000 tons, making the total demand at 1.2 million tons. Huge shortage of urea would not only make it disappear but provide dealers and other stakeholders an opportunity to make extraordinary profits. According to market speculations, the price may go up to Rs2,500 per bag. At that price, the situation would simply spin out of everyone’s hand.

A committee has been set up last week to assess urea demand in the country. It would re-invent the wheel: re-calculate the urea need for the month of December. But the formation of the committee may delay imports and encourage hoarding by market manipulator.

Instead the government should have activated the Trading Corporation of Pakistan to place order, prepare shipping and inland distribution and create an impression in the market that it is there to help stabilise supply and prices of urea.

The federal government also needs to work with the provinces to firm up administrative plans to keep check on prices, especially at the dealers’ level. All manufacturers must be made to share their data (deliveries to dealers) with the provincial governments, agriculture departments and the district coordination officers (DCOs).

The district level set-ups, on their part, must monitor dealers’ sales to make sure that the entire deliveries go to farmers at the officially declared rates. This could be the only possible way to keep some kind of check on the prices. It is now more of a common knowledge that market forces tend to cartelise for profit in case of shortage of any commodity.

On the second plank, the government must ensure maximum gas to the fertiliser sector during the next two months. The cost of urea import is simply horrendous for the economy. Imports would cost around $600 million excluding Rs30 to Rs40 billion in subsidies to sell high-priced imported urea at local price. The economy is hardly in a position to absorb that kind of financial burden.

The government must come up with import plan for the next two months, ensure maximum supply to of gas to the fertiliser sector and prepare an administrative plan to keep prices in control.

Any failure on this front could threaten food security and raise the level of poverty.