Proposal to increase urea prices by Rs358/bag under consideration

The government is contemplating a proposal that would allow fertilizer companies to raise urea prices by as much as Rs358 per bag.

This move aims to transfer the cost of over Rs30 billion required for urea imports directly to the farmers.

According to the plan under consideration, fertilizer manufacturers would be able to set prices based on a combination of the costs of imported and domestically produced urea, effectively passing the expense of Rs220,000 per ton for imported urea onto agricultural producers.

Key industry players such as Agritech have suggested increasing their Maximum Retail Price (MRP) from Rs3,936 to Rs4,095 per bag, marking a rise of Rs159, as reported by Express Tribune.

Similarly, Engro and Fauji Fertiliser Company (FFC) have proposed raising their prices to Rs3,766 per bag, up from Rs3,595, an increase of Rs171.

Fauji Fertiliser Bin Qasim Limited (FFBL) faces a potential hike to Rs4,339 per bag from the current Rs3,981, an increase of Rs358 per bag.

The Fatima Group has also proposed increases for its products, with increments ranging from Rs159 to Rs168 per bag.

During a recent Economic Coordination Committee (ECC) meeting, concerns were raised about fertilizer manufacturers potentially charging financing costs on the full annual production of 6.2 million tonnes of fertilizer, which could unduly benefit them and lead to higher fertilizer prices.

It was clarified that financing costs would only apply to the 220,000 tonnes of imported urea.

The ECC also discussed gas supply arrangements for fertilizer manufacturers and decided to review the mechanism for implementing basket pricing, with the cabinet's approval pending.

Previously, the ECC had approved the import of 220,000 metric tonnes (MT) of urea from Azerbaijan and decided that the subsidy for imported urea would be shared by the provinces.

The government of Punjab agreed to share the subsidy cost, while the government of Sindh committed to fully cover its portion of imported urea.

Responses from Balochistan and Khyber-Pakhtunkhwa were still pending. The Trading Corporation of Pakistan (TCP) estimated the import cost for the specified quantity of urea at Rs27.489 billion, with a per bag landed price set at Rs6,248.

The National Fertiliser Marketing Limited (NFML) estimated additional costs for incidentals at approximately Rs4,918.45 million.

In a meeting led by the prime minister on January 1, 2024, it was resolved that both locally produced and imported urea would be treated equally, establishing a price matrix for local urea manufacturers based on full cost recovery of imported urea.

 A committee consisting of several secretaries from relevant ministries has been tasked with finalizing an implementation mechanism with urea manufacturers.