As the fertilizer manufacturers of Pakistan are forecasting a surplus Urea inventory in the country, enough to meet the local demand over the next six months (October 2017 till March 2018), there were news that NFML is urging the government to import 0.5 million Tons urea during the upcoming 'Rabi' Crop-season.
Since the local urea producers have achieved a high level of productivity over the past couple of years – Pakistan now has gained the strategic strength to stop spending precious foreign exchange on importing large volumes of expensive urea from abroad.
The inventory position during the year had swallowed to a level that the Government allowed export of 600000 tons. NFML was unable to sell the imported urea bought at very high price and the ECC had to allow them to throw it away at Rs 1000 per bag with a loss of over 600 rupees per bag. With such a dismal performance, demanding import at a time when international prices are on constant hike, does not make much sense.
The fertilizer industry’s estimates of supply and demand over the next six months reflect that the available urea in the country during October, 2017 was 1,212,000 tonnes, out of which, 153,000 tonnes was exported and 340,000 tonnes was sold locally.
Whereby, at the end of October, the country has a carry-over inventory of 719,000 tonnes. This stock is much bigger than the monthly demand of urea in Pakistan, so the policy-makers need not consider the imports of urea, thus reduce the financial burden on the foreign exchange and additional subsidies.
Since no exports of urea are being allowed after October 2017 and the local sales forecast for next six months is only 2,780,000 tonnes, the average monthly availability of urea in Pakistan is expected to hover around One Million tonnes every month, while the average local demand will remain between 500,000 to 800,000 tons per month.
This reflects the availability of surplus urea and offer great opportunity to discourage Urea Imports, without disturbing the local market. At this juncture, if the government adopts a optimistic strategy of avoiding imports of this essential commodity, Pakistan can significantly reduce its big trade-deficit and make the economy more sustainable.
Since Pakistan’s domestic fertilizer manufacturers have invested heavily for building capacity, they are now able to consistently achieve very high productivity over the past couple of years. Hence, the government must take optimum advantage of this industry’s capability to fulfill the local demand for soil-nutrition in Pakistan’s agricultural sector through sustained gas supply. Recently, this industry also proved its ability to create big opportunities for regular exports, by producing surplus quantities of urea in the country.
Halting the unnecessary imports of expensive urea will also enable the Pakistani urea producers to reduce the heavy inventory burden of nearly a million tones, which has a huge Carrying-Cost and storage expenses.
In case, the regulators do not discourage imports, this surplus inventory will continue to build up and eventually create unbearable financial pressures for this heavily-taxed industry. Moreover, Government must involve Fertilizer producer / Industry expert in getting firsthand knowledge on country's urea demand rather relying on frivolous import data propagated by inefficient organization to merely justify their existence