30,000 tonnes MOP fertiliser purchase from Russia okayed

The Cabinet Committee on Public Purchase has approved a proposal to procure 30,000 tonnes of Muriate of Potash (MOP) from Russia amid sanctions imposed by the United States and the European Union on Moscow's trade and financial transactions.

The state-owned Bangladesh Agriculture Development Corporation (BADC) will import the fertiliser from JSC Foreign Economic Corporation Prodintorg, a Russian state institution established during the Soviet era, at a cost of Tk150.21 crore.

Finance Minister AHM Mustafa Kamal, who chaired the cabinet committee meeting on Thursday, is himself unsure about getting the fertiliser from Russia, which is at war with Ukraine, or whether Bangladesh will be able to conduct financial transactions with Russia in a normal manner due to the sanctions.

In response to a question from The Business Standard, he said Dhaka has historically good relations with Moscow.

"We always import fertiliser from Russia. If the country cannot supply fertiliser, we will shop around for alternative sources," the minister added.

He said, "If there are problems with financial transactions with Russia due to the sanctions, we will also find alternative transaction methods. In this case, the transactions should be arranged through currency swap or any other method."

The Bangladesh Bank board has approved a draft for signing a currency swap deal with the Kremlin. If this agreement is reached, the central banks of the two countries will pay the price of goods to the exporters of their respective countries on behalf of the other countries.

Owing to the Russia-Ukraine war, the prices of fuel oil and various fertilisers are on the rise in the international market. The finance minister mentioned that the government is now under a fresh pressure of subsidy.

According to Bloomberg Businessweek, if the global trade in fertiliser is further disrupted, it will mean higher costs for farmers across the globe, and in turn more food inflation at a time when global food prices have already been hitting record highs. Prices for the widely used nitrogen fertiliser urea in New Orleans have surged by 29% from the previous week – a record for the 45-year Green Markets index – after Russia invaded Ukraine.

Fertiliser prices were already sky-high, thanks to a gas crunch in Europe that has forced some producers to dial back production or, in some cases, close down. That's on top of elevated freight rates, increased tariffs, extreme weather, and sanctions on Belarus, which accounts for about a fifth of the global supply of mined nutrient potash.

Finance Minister Kamal said, "We all know why prices are rising in the international market. Some of the increase in prices is borne by the government as a subsidy, and the other portion is passed on to consumers."

He said if the whole is imposed on consumers alone, they will not be able to bear it. Again, it is not possible for the government to provide the full subsidy alone. The government needs more subsidies now.

"In the current international market prices, it would be helpful if the ministries concerned provided details on their demand for subsidy. We will receive any conveniently available funding to deal with the pressure of subsidies," the minister added.

According to BADC officials, there has been an official agreement to import 1.20 lakh tonnes of MOP fertiliser from Russia, under which an initiative has been taken to import 30,000 tonnes in the third lot.

There is an opportunity to import this fertiliser from Canada as an alternative to Russia. However, the price of Canadian fertiliser is comparatively higher than that of Russia as it is produced in line with European standards.

Balai Krishna Hazra, additional secretary of the Department of Fertiliser Management and Materials at the Ministry of Agriculture, told TBS, "We have signed an agreement with Russia for 1.2 lakh tonnes this year. According to the agreement, Moscow will deliver this fertiliser to us under its own management. As a result, we do not have to take any risk to bring fertiliser from Russian ports by renting ships in a wartime situation."

"If for some reason, Moscow cannot supply fertiliser, we will import it from Canada as we also have agreements with it," he added.

Balai Krishna Hazra said earlier this year, the government signed agreements with various countries, including Russia, on the import of fertiliser.

"The price of fertiliser is fixed in the contract. Because of the Russia-Ukraine war or any other reason, the price of fertilisers has increased in the international market, but the countries will supply fertilisers to us at a contract price," he added.

He said that as such Bangladesh does not have any reason to worry. On the other hand, the price in the international market has not increased much due to the war. The price had increased two to three times much before the war began.

An official at the Bangladesh Bank's Foreign Exchange Policy Department said despite the sanctions, there has been no major problem in transacting money in bilateral trade with Russia.

He said most of the exports from Bangladesh to Russia are done through third countries. Moreover, a number of Russian banks are still not subject to the sanctions. Banks in Bangladesh will be able to transact with banks that are not subject to the sanctions.

Officials from the agriculture ministry and the BADC said the impact of the Russia-Ukraine war on the international market is likely to increase the price of fertilisers and shipping due to the increase in the price of gas and fuel oil. However, the hope is that Bangladesh has enough stocks to meet the demand for different types of fertilisers in the current boro season.

In fiscal 2021-22, there is a demand for 57.50 lakh tonnes of chemical fertiliser – 26 lakh tonnes of urea, 7.5 lakh tonnes of TSP, 7.5 lakh tonnes of MoP and 16.5 lakh tonnes of DAP.

Russia is the main import source of non-urea fertiliser for Bangladesh. Besides, Bangladesh imports 7.5 lakh tonnes of MOP every year from Russia's close allies Belarus and Canada.

Most of the di-ammonium phosphate, also known as DAP, is imported from China. Besides, the private sector imports from Jordan. Fertiliser also comes from Saudi Arabia and Morocco. Urea fertiliser is imported from China, Qatar, the United Arab Emirates (UAE) and Saudi Arabia.

The fertiliser known as TSP or Triple superphosphate is imported by BADC from Tunisia and Morocco. The private sector imports the fertiliser from Morocco and Bulgaria.

According to the Bangladesh Fertiliser Association (BFA), the country has stocks of fertiliser required for the current Boro season and the upcoming Aman season. The government will set fertiliser targets for next year in April-May. The subsidy for next year will depend on the international market situation at that time.

Riaz Uddin Ahmed, executive secretary of the Bangladesh Fertiliser Association, said the prolonged effects of the Russia-Ukraine war will only add to the crisis.

"Most of the MOP fertilisers are imported from Russia and Bulgaria. Problems with these sources can lead to a reliance on Canada in the future," he added.

The agriculture ministry says global fertiliser prices have tripled since last year due to the Covid-19 pandemic. A subsidy of Tk7,000-9,000 crore is paid every year, but this time it may increase to Tk28,000 crore. The budget for the current financial year has allocated Tk9,100 crore for fertiliser subsidy.

In the last fiscal year, the import cost per kg urea was Tk32, TSP Tk33, MOP Tk23, DAP Tk37, which has increased to Tk96, Tk70, Tk54 and Tk93 in the current financial year respectively. However, per kg urea is being given to the farmers at Tk16, TSP at Tk22, MOP at Tk15 and DAP at Tk16.