Urea import costs $175 million to national kitty

February 13, 2014

RIZWAN BHATTI

Urea price
Urea price

The federal government”s decision to import 0.5 million tons of urea for Rabi season has cost around $175 million to the national exchequer. Sources told us on Tuesday that although at the time of import, urea prices in the world market were at a reasonable level, import for the domestic consumption had consumed millions of dollars.

The country is already facing a challenge of depleting foreign exchange reserves due to rising debt payments. Currently the country”s totalled liquid forex reserves stand at about $8 billion including $3.1 billion of State Bank of Pakistan and $4.8 billion of banks. In October 2013, the Economic Co-ordination Committee of the Cabinet had decided to import 0.5 million tons of urea to ensure timely and uninterrupted supply of the commodity for Rabi season as domestic production was not sufficient due to gas curtailment. The ECC had directed Trading Corporation of Pakistan (TCP) for import of some quantity till December 2013. However, the import process was completed in January 2014 as the import was made through different tenders in order to avoid speculation. Overall, the TCP issued some five tenders for the import of 0.5 million tons of urea during November 2013. The urea prices were less than $300 per ton Cost and Freight (C&F) in the international market in July 2013, however, it gradually started upward trend followed by higher demand from Pakistan and India and reached about $340-350 per ton C&F in November last year.

TCP conducted first urea tender on November 8, 2013 and finalised the urea import deal with M/s CHS Europe Switzerland for import of 100,000 tons at $344.73 per ton C&F. the second tender was opened on November 11, 2013 with three bids and M/s Key Trade Ag was awarded the tender at $352.80 for the import of 100,000 tons. The third urea import tender was conducted on November 18, 2013, in which six foreign suppliers participated, of which two were found non-responsive. The TCP awarded the tender to the lowest bidder namely M/s Dreymoor at $344.42 for 100,000 tons urea import.

The fourth urea Import tender was opened on November 20, 2013 with four bids and the TCP signed a deal for the same quantity with M/s Liven Agrichem at $353.80 tons. The fifth and last urea import tender was awarded to M/s Dreymoor at $354.67 per ton for the import of 100,000 tons of urea. Under this import, the first shipment arrived on December 5, 2013, while the last consignment of 52,000 tons arrived on January 22, 2014 and its offloading was completed in a week.

Overall, the TCP has established some five Letter of Credits (LCs) amounting about $199 million for the import of side quantity. Sources said that the subsidy paid on this urea import would be additional to this cost. The government has already decided to sale imported urea at local prices, despite the fact that the imported urea is much costlier than locally produced commodity. It may be mentioned here that following the directives of the federal government, the TCP has been importing urea for the last few years aimed at filling the demand and supply gap. Earlier, the government was selling imported urea at about Rs 100 per bag lower than locally produced urea. However, recently the government has decided to sale imported urea at the same price. Business Recorder

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