Urea price-drop to save Tk 5,000cr in subsidy

A drastic fall in the prices of urea fertiliser in the international market has left an opening for Bangladesh government to save around Tk 5,000 crore subsidy this fiscal year.
Officials said the budgetary allocation for this farm input subsidy might be utilised for other development purposes.
In fiscal 2007-08, the government spent Tk 35,000 in subsidy for per tonne of urea, which means a total of Tk 6,000 crore.
The urea plunged to $247 a tonne last week from $815 in August, according to FMB Group, a UK-based fertiliser price monitoring agency. The group says the international petrochemical market witnessed such a price-drop on the global financial recession.
The government has set a target to supply 30 lakh tonnes of urea in the current 2008-09 financial year as per demand. The annual demand was 28.18 lakh tonnes last fiscal year.
Of the total demand for urea, the state-owned factories will be able to produce around 17 lakh tonnes, while 8 lakh tonnes will be imported from abroad and the remaining 5 lakh tonnes are supposed to be procured from Kafco (Karnaphuli Fertiliser Company) at international rate.
“If the urea price remained static around $800 a tonne, the government had to spend Tk 7,176 crore for the required 13 lakh tonnes of urea. But now it will need only Tk 2,242 crore to procure the amount at the current rate,” a high official of the industries ministry said.
He said the decision of setting the fertiliser price at Tk 10,000 a tonne at retail level this year against the previous price of Tk 4,850 will also help save a huge amount of subsidy this year.
“The government will benefit from the reduced price of fertiliser as a result of the global petrochemical price-drop. It is now considering diversion of the money earmarked for fertiliser subsidy to other development works,” said Ilias Ahmed, additional secretary, industries ministry.
He said the retail price has been raised to make the local fertiliser factories commercially viable. The over 100 per cent rise in the urea price was made in June to help make up for the government's ever-increasing expenditure, as agricultural inputs were marketed at subsidised rates.
“Now the government-owned factories, who previously faced manifold problems including a big gap between their production costs and selling prices. These factories sold their produces at Tk 4,850 a tonne against the production cost of Tk 7500,” Ahmed said.
In this context, he pointed out that the government has already imported over 3 lakh tonnes of urea at a higher rate in line with its routine procurement drive just before the international price came down to $247 per tonne.
The official expects the rest of the required urea to be procured at the present reduced rate.
Under the revised rate, the mill-gate price of urea stands at Tk 10,000 per tonne or Tk 10 per kg, while it is Tk 10,700 per tonne or Tk 10.70 per kg at buffer stocks level.
Earlier, the official prices of urea were Tk 4,800 per tonne or Tk 4.80 per kg and Tk 5,300 per tonne or Tk 5.30 per kg at mill-gate and buffer stock levels.
Saudi Arabia, United Arab Emirates (UAE), Jordan, Kuwait, Qatar, Russia and Belarus are the large fertiliser suppliers to Bangladesh.
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