ECC tells TCP to explore options
ISLAMABAD: The Economic Coordination Committee (ECC) of the Cabinet has directed the Trading Corporation of Pakistan (TCP) to explore options for fresh tendering/G2G basis of 40,000 MTs of urea to meet the requirements.
These directions were issued at a recent meeting of the ECC wherein the issue of smuggling of urea was also raised in the meeting.
Ministry of Industries and Production (MoI+ACY-P) informed the forum that the ECC while considering its summary dated 27th October, 2022, had approved the proposal to allow Trading Corporation of Pakistan (TCP) to proceed ahead with the lowest offer received from M/s Makhdoom Logistics Services +AEA- +ACQ- 520/MT for import of 300,000 MT, urea fertilizer. The Federal Cabinet also ratified the ECC decision on October 29, 2022. Subsequently, on 14th +ACY- 15th November 2022, TCP noted that the supplier, ie, M/s Makhdoom Logistics Services had not confirmed any cargo and TCP intended to cancel the contract on expiry of 1st shipment window i.e. November 19, 2022. Since the procurement through tender had been unsuccessful, therefore, TCP suggested the following options: (i) total landing in December 2022 of 160,000 MT of which share of M/s Socar (G2G), 70,000 MT +AEA- +ACQ- 710 / MT+ADs- and (ii) M/s Pacific (tender), 90,000 MT +AEA- +ACQ- 610/ MT. Total cost of both cargoes is +ACQ- 104.6 million of which +ACQ- 49.7 million was for M/s Socar and +ACQ- 54.9 million for M/s Pacific.
Total landing in January 2023 will be 214,000 MT with M/s Sinochem(G2G) accounting for 60,000 MT at +ACQ- 480(fob) MT, M/s Cnooc (G2G) 65,000 MT at price of +ACQ- 480 (fob) and M/s Pacific (tender) 90,000 MT +AEA- +ACQ- 610/ MT.
Ministry of Industries and Production further stated that the available options offered by the TCP were examined by the Ministry in consultation with Ministry of National Food Security +ACY- Research. Prices offered by M/s Socar and M/s Pacific were higher than the international market price as well as the price quoted by Chinese firms. Based on the quoted prices by three suppliers, MoI+ACY-P considered the G2G option from China as most viable. The Ministry was further of the view that TCP may continue to explore options for procuring urea fertilizer through fresh tendering/ G2G option required during the month of December 2022. It was also noted that as M/s Makhdoom Logistics Services was non-responsive, MoI+ACY-P/ TCP initiated negotiations with the Chinese firms, nominated by National Development and Reforms Commission (NDRC) China for export of 300,000 MT urea fertilizer to Pakistan. The Chinese nominated firms, ie, M/s Sinochem and M/s Cnooc cited the price +AEA- +ACQ- 570/MT (FoB basis), however during the course of negotiations, spanning five days between November 11-15,2022, prices were brought down to +AEA- +ACQ- 480 /MT (FoB basis) (price reduction of +ACQ- 90/MT). After long negotiations, both the Chinese firms committed to supply 125,000 MT of urea +AEA- +ACQ- 480/MT (FoB basis) on 90 days deferred payment basis, inclusive of markup.
Ministry of Industries and Production subsequently submitted the following proposals for consideration and approval of the ECC: (i) TCP may be allowed to issue fresh tender/explore G2G option for import of 75,000 MT urea fertilizer for meeting demand of Urea fertilizer for the month of December-2022+ADs- and ( ii) TCP may be allowed to proceed ahead for import of 125,000 MT (5000 MT MOLSOI on G2G basis from China, for meeting demand of Urea fertilizer for the month of January-2023 at +ACQ- 480/MT (FoB), on 90 days deferred payment basis, inclusive of markup.
The ECC held threadbare discussion on the case. Minister for Commerce observed that as cultivation of wheat was in full swing, therefore, availability of urea should be ensured for the crop in December, 2022. It was stated that fresh tendering for import of urea was a time taking process. TCP needs to explore options by December 2022.
Chairman TCP informed the forum that M/s Socar, Azerbaijan had approached TCP for provision of available urea cargo totaling 70 KMT - two vessels 35 KMT each +AEA- +ACQ- 710/MT in mid-December, 2O22 and ending December, 2022 respectively. The company further stated that the cargo could be diverted to Pakistan in case its bid was accepted within their informed deadlines. The Chairman TCP further observed that if the urea supply could be managed in December, 2022 through the existing supply of local urea in the country then procurement of entire 300 KMT urea from Chinese SOEs at agreed rates for supply landing in January, 2022 would be the best option. However, in case there would be no supply of urea, then the best option would be to procure urea from M/s Socar which was in a position to supply it in December, 2022 when the country would be in great need of urea for Rabi season. He further contended that as result of negotiation, M/s Socar had agreed to reduce its price from +ACQ- 710/MT to+ACQ- 685/MT. There was a consensus at the forum that country was in dire need of urea in December, 2022 to make sure availability of wheat, however, in case there was no supply of fertilizer in December, then production of wheat, an essential food item, may also suffer.
Ministry of National Food Security and Research informed the forum that all possible efforts were made to keep the volume of the buffer stock of urea in order which was currently kept at 200,000 MT. It was further stated that having a buffer stock works as a stabilizer for the market.
Finance Minister informed the ECC that during the recent high level visit to China, the matter was also discussed with the Chinese side. Mol+ACY-P was further directed to explore other options for procurement of urea fertilizer either from Saudi Arabia (ITFC financing) or others in the field.
On the issue raised relating to smuggling of urea, Finance Minister directed MNFS+ACY-R to write to the Ministry of Interior/authorities to take special measures to curb smuggling. He also directed MNFS+ACY-R to make a presentation to the ECC on targeted subsidy and the related mechanism. He further directed to conduct a comprehensive study on production and costing of urea from local gas verses imported gas. Special Advisor to the PM on Governance Effectiveness suggested that a detailed study has been concluded by the Planning Commission relating to fertilizer and Asim Saeed, Member (PSD), FC may be invited to make a presentation to the ECC, to which the forum agreed.
After detailed discussion, the ECC allowed TCP to import (i) 125,000 MT urea fertilizer (5000 MT MOTSO) on G2G basis from China for meeting its demand for January 2023 at +ACQ-480/MT (FoB), on 90 days deferred payment basis, inclusive of markup+ADs- (ii) 35,000 MT urea fertilizer from M/s Socar on G2G basis for meeting its demand for December-2022 at +ACQ- 685/MT+ADs- and (iii) for procuring remaining quantity of 40,000 MT of urea, TCP shall explore options for fresh tendering/G2G basis, to meet requirement of urea fertilizer in the country.