KARACHI: Saudi Fund for Development (SFD) will provide $100 million credit facility for import of 0.2 million tons of urea to meet domestic demand during Rabi season.
Sources said under this credit facility urea will be procured from Saudi Arabia Basic Industries Corporation (SABIC) to avoid any shortage in Rabi 2012-13 as local urea production is disturbed due to gas curtailment.
SFD is continuously supporting Pakistan for import of urea and since 2007 has provided $555 million credit facility for import of 1.17 million tons of urea through SABIC, they added.
Following the directives of the Economic Coordination Committee (ECC) of the Cabinet, Trading Corporation of Pakistan (TCP) is importing urea to meet domestic requirement.
Sources said talks for the import of 0.2 million tons of urea under the credit facility are in progress and the federal government is likely to sign financial agreement with SFD soon. After this, the state run grain trader will finalize a commercial agreement with SABIC to import urea under $100 million credit facility. The commercial agreement is likely to be signed by M/s Jaffer Brothers (Pvt) Limited - the SABIC’s agents for Pakistan and TCP.
The agreement will cover supply of approximately 200,000 tons of urea under the $100 million SFD credit facility, they added.
“Currently, the Economic Affairs Division (EAD) is engaged with SFD to finalize the financial agreement and once the agreement is signed, TCP will start operation for import of 0.2 million tons of urea from SABIC,” they said. This credit facility is likely to be for a period of two years and repayment will be guaranteed by the Finance Division, government of Pakistan.
Natural gas shortfall has seriously hurt the local production of urea and the government is compelled to import huge quantity of urea to meet domestic demand. Presently, mega urea plants have shut their operations due to unavailability of gas, a basic raw material for urea production.
Sources said that urea import under SFD credit facility will provide some cushion to the federal government to avoid pressure on external account as well as on Pak rupee.
Although, urea shortage during Rabi season has been estimated at about 0.3 million tons, the federal government has decided to import 0.5 million tons of urea to avoid any shortage as the local urea producers are unable to cater for local demand due to inconsistent gas supply.
TCP has already finalized deals for import of 0.3 million tons of urea for Rabi crop. Out of this import 183,000 tons of sugar has already been arrived, while the remaining quantity is likely to reach by the end of this month.
As per the government estimates, urea requirement for Rabi season will be 3.052 million tons against local estimated supply of 2.745 million tons with a shortfall of 0.3 million.