IMF Bars to Give Subsidy on Import of Urea

By Newztodays Team

International Monetary Fund (IMF) has barred government to give subsidy on import of urea.

The Finance Division has refused to provide a subsidy on import of urea due to financial constraints and IMF conditions.Urea Sales Drop by 21% YoY in June 2024, Inventory at 37-Month High

In a recent meeting of economic coordination committee (ECC), the Finance Division indicated an inability to provide a subsidy for Urea import. It was agreed that the mechanism for determining Urea prices, which involves mixing imported and local Urea to calculate an average price, should continue.

It was informed that there is a forecasted shortage of 351,000 MT of Urea if RLNG-based plants are not operational during the Rabi season 2024-25. To stabilize market prices and ensure adequate supply, it was proposed to import 100,000 MT of Urea.

It was proposed to Procure 100,000 MT of Urea on open tender from the lowest bidder, M/s West Trade International FZE, UAE, at USD 358.99/MT. It was informed to continue G2G negotiations to find cheaper import options.

It was informed that the subsidy requirement of around Rs. 5.865 billion for importing 100,000 MT of Urea was discussed, with considerations of whether it should be borne by the Federal Government or the Provincial Governments.

The ECC acknowledged that the rates received through G2G negotiations were higher than the tender rates. The Ministry of Industries and Production indicated ongoing discussions with the Government of Turkmenistan for potentially better pricing. The issue of gas pricing for the fertilizer sector is still under consideration.
The ECC, in its decision Case No. ECC-73/8/2024 dated 7th May 2024, allowed the Trading Corporation of Pakistan (TCP) to import 200,000 MT Urea through open tender and G2G (government-to-government) basis.

This decision was ratified by the Cabinet in Case No. 142/18/2024 dated 14th May 2024 and Case No. 170/20/2024 dated 11th June 2024.

TCP issued a tender for 150,000 MT, which was opened on 29th July 2024. Six bids were received, with the lowest from M/s West Trade International FZE, UAE, at USD 358.99/MT. G2G negotiations with Malaysia and Azerbaijan resulted in higher rates than the tender. Negotiations with Turkmenistan and efforts to get approval from NDRC, China, are ongoing.

The cost for importing 157,500 MT of Urea is estimated at PKR 18,372,662,565 (PKR 18.489 billion). The landed price for a 50 kg bag of Urea is estimated at PKR 5,832.59. After adding incidentals from NFML at Rs. 1,500 per bag, the cost would be Rs. 7,332.59 per bag. The current market price for Urea fertilizer is Rs. 4,400 per bag, indicating a subsidy requirement of around Rs. 5.865 billion.