In another decision the same meeting approved in principle formation of North-West Power Generation Company Ltd.

The advisory committee advised the industry ministry to revise its proposed hike in the price of urea in line with the real market scenario and to submit it again to the advisory committee by July 15.

The proposal of the ministry sought to raise the price of urea by 51 percent per ton in a bid to minimise the loss of government run fertiliser factories.

Meeting sources said the advisory committee predicts that the proposed price hike might help only to recover the loss already incurred but will not ensure profit.

According to the projections of the government, the six government run fertilizer factories might lose Tk 350 crore in the current fiscal.

If the government adopts the proposed price of urea, the predicted loss of the factories will be minimised, but if the government increases the prices of power and gas in the near future, the fertilizer factories might slide back into the realm of loss again, the committee observed.

The committee thinks that fixing the price time and again is not viable rather it should be fixed for a long period of time.

Following the logic, the committee suggested fixing the price of urea for a long period after examining the production costs and capacities of all factories.

The current price of a ton of urea at the factory end is Tk 4,800, which was proposed to be hiked to Tk 7,000, with an increase of 45.83 percent. At the buffer end a ton of urea is now being sold for Tk 5,300, which was proposed to be hiked to Tk 8,000, with an increase of 50.94 percent.

The proposal said annual demand for urea in Bangladesh is 28 to 29 lakh metric tons while the six government run fertiliser factories' present combined production capacity is 17 to 18 lakh metric tons at the most. The rest of the demand is met by import and purchase from Kafco. The cost of importing a ton of urea is about Tk 25,000.

Due to the current subsidised price of urea, the factories have to bear a loss of Tk 2,200 a ton as the current production cost of a ton of the fertilizer stands at Tk 7,000. The current factory end price of urea was fixed in 1997.

The industry ministry proposal also cited the prices of urea in India ranging from Tk 7,000 to Tk 7,600, and in Myanmar from Tk 15,000 to Tk 19,000. Due to the high prices in those countries, about 2 to3 lakh metric tons of urea is smuggled out each year, the ministry estimated.

The proposal observed that the government incurs a total loss of Tk 2,900 crore a year due to low prices of urea.

The urea factories are also suffering from an acute cash flow crisis, which might compel the authorities to close those down.

NORTH-WEST POWER
The advisory committee also in principle approved yesterday the formation of North-West Power Generation Company Ltd to ensure uninterrupted electricity supply to the country's northern and western regions.

All power plants which are currently in those regions and all which are to be established there in future will be operated by the new company, sources said.

Construction of two 150MW power plant in Sirajganj and Khulna will also come under the new company's supervision.

Besides, two thermal power units of 250MW at Barapukuria will also come under the new company.