Ministry proposes export of urea

Ministry of Commerce (MoC) has proposed the export of 0.3 million tons of urea after considering its likely impact on domestic price and gas supply situation, official sources told Business Recorder. Giving details, the sources said an inter-ministerial Fertilizer Review Committee (FRC) has been constituted in Ministry of Industries & Production (MoI&P) which periodically meets to review the supply-demand situation of fertilizer in the country.
MoI&P revealed that a meeting of the FRC was held on October 19, 2016 to review the fertilizer demand & supply situation for Rabi Season 2016-2017 (October 16 to March 17). The FRC was informed that there were 1.739 million tons (MMT) of urea stocks available with the fertilizer companies including 0.273 MMT of imported urea available with National Fertilizer Marketing Limited (NFML).
On the basis of the gas supply position reported by the Ministry of Petroleum and Natural Resources, the estimated production up to March 2017 would be around 2.585 MMT, which makes the total availability of urea around 4.324 MMT (1.739 MMT stocks + 2.585 MMT production).
The expected off-take for the Rabi season, as estimated by the FRC, after factoring in 11% excess demand owing to reduction in urea prices, would be around 3.3 MMT. The total surplus urea fertilizer would be around 1.0 MMT (4.324 MMT available - 3.3 MMT off take); after maintaining a strategic reserve of 0.2 MMT, around 0.8 NIMT surplus will be available for export up to June 30, 2017.
For the period beyond Rabi (i.e. April-June 2017), as per the findings of the FRC, the production of urea would be around 1.5 million tons whereas the off-take, on the basis of last three years'' consumption pattern, will be around 1.1 MMT.
In view of the position relating to inventory, expected production, future off take and strategic reserves in the country, the FRC unanimously concluded that: (i) in ongoing Rabi season 2016-17 availability of urea will be comfortable and ;(ii) expected surplus urea fertilizer i.e. 0.8 million tons be recommended to the ECC of the Cabinet for export up to June 30, 2017.
According to sources, Ministry of Commerce approached the Ministry of Industries & Production mentioning the likely upward pressure of urea exports on domestic prices of urea and the advisability of generating a future surplus by utilising subsidised gas while the export-oriented industries are facing gas shortages and running on expensive LNG.
MoI&P has "reiterated that 0.8 MMT urea fertilizer is likely to be surplus till June 30, 2017. However, the urea fertilizer manufacturers unanimously expressed that they will be relieved of the glut situation even if the permission is granted for the export of 0.5 MMT urea". On the matter of upward pressure on prices, the MoIP has stated that it is "not the domain of this Ministry".
Commerce Ministry is of the view under Sr. No. 13 of the Schedule-I of Export Policy Order, 2016, that export of urea is not allowed: It can however, be exported subject to the approval of the ECC of the Cabinet on a case-to-case basis.
The sources further stated that the urea export proposal was circulated amongst the Ministries of National Food Security and Research (MNFS&R), Petroleum and Natural Resources (MP&NR), Finance, Industries and Production (MoI&P), Planning & Development & Reforms (MoPD&R) and Federal Board of Revenue (FBR).
The MoI&P has concurred with the proposal with the suggestion that 0.5 million tons may be allowed for export; FBR has supported the proposal subject to interagency safety/ co-ordination mechanism; National Fertilizer Development Centre, MoPD&R has proposed that subsidy of approx. Rs 570 per 50 Kg bag provided as feedstock to the urea plants and may be recovered from exporters.
MNFS&R has opined that the exports of urea should not lead to export of the subsidised fertilizer available with the dealers and must not cause a price hike. The MP&NR supported the proposal subject to the condition that priority for exports be given to the plants which are manufacturing urea by using RLNG. Ministry of Finance supported the proposal to export 0.3 million tons of urea subject to the conditions that export would not affect the domestic price and there would be no subsidy on the said export.
After considering the viewpoints of all the stakeholders, Commerce Ministry has proposed that the ECC may consider allowing the export of urea fertilizer up to 0.3 million tons as recommended by the FRC, after considering the likely impact on domestic price and the gas supply situation subject to the following conditions: (i) the contract for export of urea will be registered with Trade Development Trade Development Authority of Pakistan (TDAP) on first come first serve basis; (ii) export will be effected within 45 days of registration of contract but not later than 30th April 2017; (iii) the FRC will meet immediately after April 30, 2017 to review exported quantities, and if the originally estimated surplus materialises, the committee may recommend additional quantities for export; and (iv) FRC will monitor domestic prices of urea on a monthly basis and in case of abnormal increase in retail price as per weekly sensitive price index, the FRC will recommend to ECC discontinuation of further exports.