A surge in urea prices

This is to clear the controversy that was sparked after the news relating to the surge in urea prices surfaced. In 2016, the government reduced urea price from Rs1,790 and capped it at Rs1,400 per bag. A voluntary reduction of Rs50 by manufactures, the reduction of Rs184 as the impact of GST reduction from 17 percent to five percent, and a subsidy of Rs156 per bag brought down the price by Rs390 per bag. Through the Finance Bill 2017-18, the government revised the subsidy scheme and reduced the subsidy to Rs100 per bag, while keeping the price at Rs1,400, implying that manufacturers would bear a further burden of Rs56 per bag with the total contribution of Rs106 per bag. Recently, the reduction of GST on urea from five percent to two percent and a withdrawal of the subsidy led to a price surge by Rs52 per bag. Keeping in mind the impact of inflation and rupee devaluation, urea prices were bound to rise. It should be noted that the price of urea in the international market is somewhere around Rs2,300 per bag. In light of these calculations, it is clear that the news of price increase is exaggerated.

Syed Natiq Ali Naqvi

Lahore