LAHORE: As the industry calculates the impact of imported urea on the local market and the cost of newly-approved gas rates on price, it says that both factors may lead to a shattering increase of Rs1,700 per bag — taking urea price from current Rs3,800 to Rs5,500 per bag.

According to the industry, the government had recently imported 225,000 tonnes of urea at Rs6,500 per bag. With packing and logistics costs added, the price went up to Rs6,700 per bag. Unable to sell it at this cost or subsidise it, the government is now proportionately passing it on to the industry and asking it to absorb it in its overall sales price. The second shock wave is created by newly approved gas rates, which were recently approved by the Economic Coordination Committee and the Cabinet with retrospective effective Feb 1. It means the industry has to raise the price even further to recover the cost of already sold fertiliser.

“This is disastrous, to say the least,” says Khalid Khokhar of Pakistan Kissan Ittihad. To create a comparison, he says, India is selling urea at Rs900 (in Pakistan rupee denomination) per bag by providing a subsidy of $24 billion per annum for the fertiliser sector. To avoid a huge increase in urea prices, the government should come up with alternative plans instead of abnormal gas price increases for the industry.

Based on revised gas prices, estimates suggest an increase of around Rs1,700 per bag is likely to have far-reaching consequences and small farmers constituting 90 per cent of the farming community may not be able to cultivate their lands. The plight of maize and cotton growers in 2023, who have suffered significant losses due to the low prices of their produce, demands an urgent need for effective support measures.

Further clarifying the impact on farmers and farming, Mr Khokhar draws a comparison: wheat price during 2022 was Rs3,900 per 40kg and per bag urea price of Rs2,300 per bag. However, with urea price potentially increasing to Rs5,500 and wheat price staying constant would only squeeze life out of farmers, and even, farming. Due to such a disproportionate equation between expense and income, farmers may not be able to cultivate their entire land. It would render the entire agricultural cycle economically catastrophic for farmers, he said.

“This urea price hike may ignite the sentiments of farmers and if the government tried to procure wheat at the current support price, it may lead to civil unrest across the country, he warned.

Published in Dawn, February 20th, 2024