Friday, August 19, 2011

Subsidy on imported urea paid by government of Pakistan , 2011

The govt of Pakistan has to give a total subsidy of Rs30 billion on import of one million tons of urea (Rs1,500 per bag) to meet the domestic requirements. Total requirement of urea for Rabi season is around 3.26 million tons and the government has to import one million tons, Vice-President of Engro Fertilizers told this to press.
He further told that about  3.26 millions tons will be consumed during the period of November and December 2011. He said that December requires 900,000 tons while domestic manufacturers might produce only 300,000 to 400,000 tons. Four to five percent reduction in urea application means loss of billions of rupees to the farmer community in terms of reduction in per acre yield .

It's a double edge sword rather a triple, on one side it hurts government revenues and balance of payments , on the second growers face shortage and high prices which reduces their per acre yield and thirdly it is extremely damaging for fertilizers companies especially new plants which are built by an investment of more that a billion dollars but facing financial problems.

Govt should accept the proposal of the fertilizer companies to divert gas from power plants to fertilizer plants and run the power plants on furnace oil and that the additional cost of furnace oil will be borne by fertilizer companies. I am unable to understand why govt has not accepted such a viable suggestion; may be they are not getting any commission in this deal.

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