Farmers hopeful of urea subsidy

The recent urea buying pattern is reminiscent of the behaviour during the same period last year. The farmers, it appears are playing the waiting game.
The National Fertilizer Development Centre (NFDC) released the fertiliser statistics for April 2013, with urea off-take at similar level to the previous year, and down 24 percent from Aprils five-year average.
Market sources say that urea off-take in May so far has also been subdued, affirming that the farmers are waiting for the new government to announce subsidy. Recall that the PML-N government is likely to rationalise natural gas tariffs across the board and has specifically mentioned the fertiliser case.
The plan is to abolish the feedstock subsidy and instead go for a direct approach by subsidising the end product. It remains to be seen to what extend does the government decide to subsidise urea, but making up for the feedstock cost increase seems the way to go.
On DAP front though, there is not much clarity. Despite a continuous fall in prices, the off-take has refused to go up. The previous government had withdrawn subsidy on phosphate fertilisers, and there is little reason to believe that the upcoming government will make any room for it either.
The dream of a balanced fertiliser application may still remain a distant one.
For local manufacturers, the times ahead may not be easy, at least in the short run. With power crisis having gripped the entire country so badly, gas curtailment for industries appears to be very much on the cards.
Urea prices have stayed low for almost a year and the revision in feedstock gas price and expected gas curtailment are going to cause significant pressure on profit margins of local manufacturers.
With lesser local production expected due to extended gas curtailment, the government is expected to import urea in higher quantity. Abundant imported urea is likely to put pressure on locally produced urea prices, just as it did in the dying months last year.
The local players are believed to be working on a plan to secure low tu gas, but that will take a while - until then, they will have to face some tough times.