Will urea prices go down to reduce production cost as Pakistan faces record food inflation?

Will urea prices go down to reduce production cost as Pakistan faces record food inflation?


Local producers Fatima Fertilizer (Sheikhupura), Agritech to operate beyond August 31

LAHORE (Web Desk) – As Pakistan is witnessing a record-high food inflation, a challenge of food insecurity has emerged for the country – a natural consequence of the rising prices and reduced purchasing power.

The only way to tackle the issue is to decrease the input cost for reducing production expenditures for farmers and thus bring the food prices down.

However, Pakistan also regularly witnesses fertilizers’ shortage, especially urea, which enables the black market to manipulate the situation and make these essential inputs even more expensive for the farmers. Moreover, it also results in spending precious foreign reserves on urea imports to reduce the gap between supply and demand.

Read more: Pakistan sees 25pc rise in agri financing but can it ensure food security?

In this connection, the Economic Coordination Committee (ECC) of the Cabinet has allowed the urea producers Fatima Fertilizer (Sheikhupura) and Agritech to operate beyond August 31, 2023 till March 31, 2024 so that the country can meet the requirements for the upcoming Rabi – winter sowing – season.

The abovementioned fertilizer plants get gas from the Sui Northern.

However, the summary moved by the Ministry of Industries and Production also mentioned the import of 200,000 metric tonnes of urea – again showing that Pakistan, a country with agri-based economy, doesn’t produce the required amount of fertilizers with urea being the most used of these.

But the ECC had already decided in March this year that the two plants would operate on indigenous gas without any subsidy.

The move comes as the Balochistan government refused to share any financial burden for lifting the imported urea while Punjab was ready provided the Centre would share the subsidy cost. However, the federal government had refused to bear any financial cost.

It is in this context that the ECC has now decided to the two fertilizer plants to produce urea during the Rabi season [winter] – the period when the effects of gas shortage are most visible in the country.

The question remains: Will the farmers get any relief in terms of urea prices? If not then the food inflation crisis is here to stay.