The Economic Co-ordination Committee (ECC) of the Cabinet has ordered an inquiry against the Chairman of Trading Corporation of Pakistan (TCP) for allegedly flouting the former's decision to use Gwadar port for import of urea worth billions of rupees, sources in the Ministry of Industries told Business Recorder. Some members of the ECC pointed out that in violation of an earlier decision of the ECC, urea had been imported through Karachi port, instead of Gwadar.
The need for a thorough probe into the matter was stressed. "ECC had decided some time back that in future urea will be imported through Gwadar Port instead of Karachi Port or Port Qasim on the request of Balochistan government," sources said. Secretary, Port and Shipping, will thoroughly probe the matter and submit a report to the ECC within a fortnight. "The objective of using Gwadar Port was development of the port," sources added. The ECC, which met on August 23, 2011, with Finance Minister Dr Abdul Hafeez Shaikh in the chair, was updated on the status of urea import.
It was intimated that subsequent to approval of the ECC, gallop tenders were issued on August 12, 2011 which were opened on August 22. The lowest bidder offered 65,000 tons at a price of $534.50 per ton while the second offered 55,000 tons at $537.50, and the third lowest bidder's offer was 537.37 per ton. The ECC was informed that these were the best prices ever received, and the tender committee finalised the purchase of the approved quantity of 150,000 tons, which will arrive in Pakistan by the end of September 2011.
It was further intimated that additional quantity of 50,000-75000 tons could be procured at these prices which are valid till 20:00 hours of August 23, 2011. Accordingly, a decision from the ECC was solicited. The government has already decided to import 150,000 tons of urea for Kharif crop to fill the demand-supply gap. However, the Ministry of Petroleum and Natural Resources suggested that demand-supply gap of urea be worked out on the basis of 15 days' closure of gas supply to fertiliser plants per month in addition to existing gas load shedding.
According to Ministry of Industries, shortage of urea (in addition to 0.150 million tons of urea which is under import) under two scenarios would be as under:
Scenario -I: (i) 20 percent gas curtailment on an open ended basis on Sui network; (ii) l2 percent curtailment on an open ended basis for fertiliser plants being operated on gas from Mari Gas Field; and (iii) 45 days winter gas load shedding. Sources said that import requirement for current Kharif will be 0.050 million tons whereas requirement for Rabi has been estimated at 0.713 million tons for which $455 million foreign exchange will be required. The government has to extend Rs 18.374 billion as subsidy on urea.
Scenario- II: (i) 20 percent gas curtailment on an open ended basis on Sui Network; (ii) 12 percent curtailment of gas on an open ended basis for fertiliser plants operated on gas from Mari Gas Field; (iii) 45 days winter gas load shedding; and (iv) 15 days monthly gas load shedding proposed alternately for fertiliser plants on SNGPL network. Under this scenario shortage of urea for Kharif 2011 and Rabi 2011-12, as forecast by the fertiliser industry, would be as follows: import requirements will be around 1.587 million tons ( 0.387 million tons in Kharif and 1.2 million tons in Rabi) for which $941 million foreign exchange will be required. Total subsidy will be around Rs 37.88 billion.
India is also importing 1.1 million tons of urea during the current year and subsidy will be picked up by the government of India. The ECC was also informed that imported urea costs Rs 2900 per bag including all incidentals, whereas urea is provided to the farmers at a subsidised rate of Rs 1225 per bag. Thus, each bag of urea involves a subsidy of Rs 1675. It was suggested that in view of the importance of the matter, it would be better that a small group should deliberate upon it in next 2-3 days and come up with a viable proposal.
The ECC was also apprised that a subsidy of Rs 17 billion would be involved for import of urea to be picked up by the government. One viewpoint was that the amount of subsidy involved could be better utilised - by diverting gas to fertiliser plants and using subsidy as alternative fuel. However, it was considered essential to resolve this issue expeditiously, to facilitate farming community in a timely manner.
The Ministry of Industries maintains that the government must stop gas supply to inefficient power plants and divert it to the fertiliser plants to minimise urea fertiliser import. "We have informed the ECC, as well as the Secretary Finance, regarding urea availability for Kharif 2011 and Rabi 2012. Now the ball is in the court of Finance Division," said an official of Ministry of Industries.
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