The fertilizer industry has been manipulated by only seven manufacturers, as they have abused their position by hiking urea rates by 88 per cent from Rs 850 to Rs 1,600 per bag unjustifiably on excuse of gas shortage despite the fact that gas suspension impacted just 25 per cent of the total urea manufacturing capacity. 

Industry sources said that rest additional profit went into the pockets of few manufacturers of this industry.They noted that federal government has given subsidies of over Rs 77b to urea manufacturers in the last three years (2008-11) in the form of reduced price of feed stock gas (Rs500 per bag of 50kg) with a view to make urea available to growers at cheaper rates. But growers never benefited from this relaxation as they continued to suffer regular price hikes.

Industry sources said that both plants of Fauji Fertilisers, which were not significantly impacted by gas cut, registered profits of over Rs49 billion in 2011, while Engro’s old plant was a beneficiary of price hike due to low effect of gas curtailment. Its profit for 2011 was Rs6.9 billion against Rs5.2 billion of 2010 though financial costs of new plant amounted to over Rs10 billion in 2011 compared to Rs2 billion in 2010.

They said that a few large producers occupy the market, as there are a total of seven producers, representing only three groups or players of the market. Presently, only three groups including Fauji Fertiliser, Dawood-Hercules and Engro group collectively hold 84 percent of the total urea market share.

They said that profitability of urea manufactures have broken all records in the history, surpassing all other sectors of the country, as they not only increased price at their will but also refused to pass on the benefit of government subsidies to the farmers.

They said that the abnormal price increase by all manufacturers at the same time was unjustified, as factors such as economies of scale, operation efficiency, innovation and impact of gas curtailment varied from one urea producer to the other, but manufacturers increased prices at the same time. This increase is unmatched in any other period of industry’s history, they added.

They said that as urea is a key input in agriculture and is also an essential commodity, it directly impacts each stage of supply chain in the agricultural sector and indirectly all markets. The costs of doing business, entry and growth in all these markets have been severely affected by anti-competitive practices in the fertiliser market, they added.