ECC orders comprehensive fertilizer policy amid rising Urea prices

The Economic Coordination Committee (ECC) has instructed the Ministry of Industries and Production (MoI&P) to develop a comprehensive policy for the fertilizer sector, addressing production, gas supply, import triggers, pricing, and over-fertilization. 

This directive came during a recent ECC meeting focused on urea import proposals, driven by fears of rising prices next month.

The Industries and Production Division briefed the ECC on the need for importing 200,000 MT of urea, as allowed by a May 7, 2024, decision ratified by the Cabinet. 

The Trading Corporation of Pakistan (TCP) issued a tender for 150,000 MT, receiving six bids, with the lowest from West Trade International FZE, UAE, at $358.99/MT. 

Negotiations with Malaysia and Azerbaijan offered higher rates, while discussions with Turkmenistan and efforts to get approval from NDRC, China, are ongoing.

TCP reported that importing 157,500 MT would cost Rs18.49 billion, with a landed price of Rs5,832.59 per 50 kg bag, rising to Rs7,332.59/bag after adding NFML incidentals. 

The market price of urea is currently Rs4,400/bag, indicating a subsidy requirement of around Rs5.865 billion. The first shipment is expected by August 16, 2024.

The Ministry of Industries and Production proposed importing 100,000 MT of urea for market stabilization, continuing G2G negotiations for cheaper options, and allocating a subsidy of Rs5.865 billion, to be borne by either the federal or provincial government. The ECC discussed the proposals, emphasizing the need for urea import as a buffer stock due to expected shortfall and price stabilization.

The ECC noted that G2G rates were higher than tender rates and ongoing talks with Turkmenistan might yield better prices. The forum directed finalizing the gas pricing mechanism for the fertilizer sector. 

On the other hand, the Finance Division expressed its inability to provide any subsidy for Urea imports due to financial constraints and IMF conditions.

The ECC agreed to continue the current method of averaging prices by mixing imported and local urea. Given the reasonable prices, the forum deemed it timely to import urea before the Rabi season, anticipating price hikes by September. The ECC also instructed MoI&P to formulate a holistic fertilizer policy addressing all aspects of the sector.