ECC decision to delay urea imports to hit wheat production

The ECC decision to delay urea imports, in its meeting held in Islamabad on October 13, is likely to have far reaching impact on Pakistan's economy, resulting in massive urea shortage and lower wheat production during 2011/12 as farmers don't have adequate urea for their cash crop like wheat in current Rabi season, stakeholders estimate.
They told Business Recorder here on Thursday, given the fact that agriculture contributes 22 percent to GDP and employs nearly half the labour force in Pakistan, such callous approach on the part of the government is incomprehensible.
Additionally, they said agriculture sector is the main supplier of raw materials to industries which in turn earn foreign exchange for the country. If agricultural outputs are affected by these infective decisions, it would badly hurt our exports and foreign exchange earnings.
In terms of agricultural production, December and January are the crucial months for urea application; urea demand in December is estimated to be around 0.9 million tons and in January the demand is expected to shoot up to around 0.35 million tons. If the required imports do not take place on time, farmers will face a shortage of 0.8 million tons to one million tons of urea, which will result in high market price and affect the economy.
Due to gas curtailment, four urea manufacturing plants on SNGPL network with accumulative annual urea production capacity of 2.2 million tons are already on shutdown since October 1, which is further aggravating the already serious urea shortage in the country.
If these manufacturing plants remain closed till December 1, urea import requirement for Rabi season will be 0.85 million tons and will require at least US $466 million for urea import and a further subsidy of 20 billion rupees. In the event these plants remain closed till January 1, 2012, Pakistan would be required to import one million tons urea at a cost of around US $548 million and would also have to give a subsidy of 24 billion rupees.
According to informed sources due to constant stoppage of gas supply to four fertiliser plants on SNGPL network, farmers are receiving around 3,750 metric tons per day less urea from Engro's new plant, around 1,600 metric tons per day less urea from Dawood Hercules, around 1,300 metric tons per day less urea from Agri Tech and around 300 metric tons per day less urea from Pak Arab fertilisers. This has resulted in a shortfall of around 103 thousand tons less urea production in just the first half of October 2011.
Complete shutdown of Pakarab, Engro Enven, Agritech and Dawood Hercules Fertilisers at such a critical time of the agricultural season is sending a very wrong message to the farmers' community in the country. A sense of deprivation has already started to surface in shape of sporadic protest incidents in rural areas which could increase to alarming proportions. Farmers do understand that there is a urea shortage due to non-availability of gas to fertiliser plants in the country and on top of it government has not taken any decision on time to import urea to avert any big crisis as time is running out fast for what crop in Rabi season.
Looking at the last five year's urea consumption pattern of the country it is revealed that Pakistan has been a net consumer of around 5.236 million tons urea in the year 2006, 4.913 million tons in 2007, 5.475 million tons in 2008, 6.486 million tons in 2009 and 6.123 million tons in the year 2010. Pakistan has also been a net importer of urea for the past five years, ie, around 6.45 lakh tons in 2006, 99 thousand tons in 2007, 4.24 lakh tons in 2008, 1.532 million tons in 2009 and 9.91 lakh tons in the year 2010.
As compared to current urea price per bag which varies from Rs 1500 to Rs 1700 from manufacturer-to-manufacturer, the last five years' urea prices per bag (excluding taxes) were as follows: Rs 463 in 2006, Rs 488 in 2007, Rs 583 in 2008, Rs 702 in 2009 and Rs 811 in 2010. There is almost 100 percent rise in the urea prices per 50kg bag and it will surely impact the economy of poor farmers and would result in higher food prices in the country, sources said.
Gas curtailment to fertiliser sector will have a very negative impact on the country's wheat production targets as the production target of wheat for the year 2011-12 is 25.0 million tons; lower availability and higher prices of fertilisers will further aggravate the situation during the current Rabi (wheat season) A 30 percent decrease in urea results in 10 percent reduction in wheat production and, in monetary terms, comes to around Rs 59 billion for the wheat crop alone. In this scenario, to fulfil the requirements of local industry and dietary requirements of people, Government of Pakistan will have to import wheat and cotton for which a huge amount of foreign exchange would be required.