Urea price to go up by Rs200 per bag if gas price increases

ISLAMABAD-The fertilizer industry has warned that the price of urea can go up by Rs 200 per bag in case Ogra upward revises the gas prices as demanded by the gas companies.

The gas companies SNGPL and SSGC have filed their petition for determination of gas prices for the year 2020-21.

Further, the recent budgetary amendments in tax laws present serious challenges to the fertilizer industry which may require a further increase in urea prices by PKR 200/bag, a spokesman of the industry said.

SNGPL has sought an increase in gas prices by around 100% (PKR 622/mmbtu), while SSGC has sought an increase of 20% (PKR 85/mmBTU) to meet their revenue requirements for upcoming fiscal year.

If OGRA accepts the petition in its full, this will augment the burden on all industrial sectors and consumers of the country, the spokesman said.

As the fertilizer sector will also face this gas price hike and the increase in gas cost would be passed on by the fertilizer industry, this would lead to a significant increase in the prices of essential fertilizers, especially urea.

Previously, in December 2019, OGRA had recommended an increase of 135% in fertilizer feed gas prices, along with 32% increase in fuel prices, which was further amended by the Ministry of Petroleum to increase fertilizers feed gas price by 5% and fuel gas price to be increased by 64% to PKR 1,672/mmbtu.

Although the proposal was not implemented by the government at the time, urea prices will go up by approximately by PKR 213/bag if the government goes forward to match the previously recommended gas price hike.

This possible price hike is likely to compound the burden on farming community amid the COVID-19 slow down and severe locust infestation that has destroyed thousands of acres of cultivated areas.

Urea offtake has drastically declined during the year due to worsening farm economics and the government’s subsidy announcement due to which farmers have delayed purchase decisions.

Any increase in cost of fertilizers caused by gas price hike would only add to the misery of farmers.

Amidst increasing financial difficulties of the farming community, the government should consider minimal gas price increase and try to alleviate the pressure on farmers so that national food security can be safeguarded.a

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