Govt pressed to reopen urea factories as boro season looms amid gas, cash crunch

A fertiliser shortage is casting a shadow over the upcoming boro season starting from December. Three state-owned factories are out of production due to gas shortage and imports to meet the shortfall are uncertain due to the dollar crunch.

To avert a crisis, The Bangladesh Chemical Industries Corporation (BCIC) wants to resume production without delay at two of the three state-owned fertiliser factories and it is requesting the industries ministry for gas on an urgent basis. 

With three out of the four BCIC factories capable of full production currently stopped, the target of producing 10 lakh tonnes of urea locally this fiscal year is uncertain, according to sources within the corporation. Factory closures have led to a significant deficit in production.

To be ready, the BCIC has decided to import two lakh tonnes of fertiliser through tenders. However, there are doubts about the feasibility of importing this quantity amid the current dollar crisis, especially during the peak boro season in January-February.

Boro season is crucial for rice production in Bangladesh, producing approximately 2.25 crore tonnes. Any disruption to paddy farming during this period could hurt the country's overall food security.

Lowest ever stock

At a meeting on the overall situation of urea fertiliser, convened at the BCIC on 14  September this year, agriculture ministry officials said that a significant demand for fertilisers will be created in the upcoming peak season starting from December, but stocks have never been so low in previous years.

The meeting also discussed several challenges in fertiliser management this year, including delays in opening LCs and paying for fertilisers, as well as increased shipping charges. Additionally, the meeting stressed the need for building up sufficient fertiliser stock this season since it is an election year.

The BCIC is trying to urgently reopen two closed factories, Chittagong Urea Fertiliser Limited and Jamuna Fertiliser and Chemical Company Limited, in addition to importing fertiliser.

On 13 September, the corporation sent a letter to the industries ministry to ensure gas supply for the factories.

On the same day, the industries ministry wrote to the Energy and Mineral Resources Division, cabinet secretary, and principal secretary highlighting the situation and requested them to ensure gas supply to the fertiliser factories.

Wahida Akter, secretary of the Ministry of Agriculture, said, "We have decided to procure two lakh tonnes of fertiliser through tenders. At the same time, we are discussing restarting the closed factories by ensuring gas supply."

Earlier, Petrobangla stopped gas supply to Jamuna Fertiliser on 5 September 2023 to commission Ghorashal Palash Fertiliser Public Limited Company. The company had previously been shut down for six months due to gas shortages, but it was restarted on 10 December last.

Apart from this, production was stopped at Chittagong Urea Fertiliser Limited in November last year, and Ashuganj Fertilizer and Chemical Company Limited in March this year as Petrobangla had halted gas supply, although both factories are production ready.

Industries ministry sources said there is a demand for 27 lakh tonnes of urea in the country this fiscal year with an additional six lakh tonnes required for safety stock. Against this demand, a local production target of 10 lakh tonnes of urea was set. 

BCIC estimates say that after meeting demand through imports and production, safety stock will be at 6.27 lakh tonnes at the end of December, 5.04 lakh tonnes at the end of January, 3.76 lakh tonnes at the end of February, and 3.94 lakh tonnes at the end of March.

In other words, even if the demand for December is met, a crisis will surface from January to March.

In its letter to the industries ministry on 13 September, the BCIC highlighted the situation and requested urgent gas supply for at least two of the three closed urea factories. 

Industry Minister Nurul Majid Mahmud Humayun discussed the crisis at a meeting of the Cabinet Committee on Government Purchase on 20 September and requested steps to reopen the closed factories.

Imports not feasible before February

Stakeholders have observed that importing fertiliser under private management and adding it to the supply chain will not be feasible before February.

Delays in opening LCs during the peak season will render any imports useless, they added.

The BCIC asserts that all its factories are fully prepared for production, and the only solution to the looming fertiliser crisis is reopening the factories. 

In January 2024, there will be three lakh tonnes of fertiliser in the supply line from imports and production, says the BCIC, adding that during this period, an additional supply of two lakh tonnes of urea fertiliser must be ensured by restarting at least two factories.

Currently, only Shahjalal Fertiliser Factory is in production, supplying around 1,400 tonnes of fertiliser daily.

During the 14 September meeting at the BCIC, Dipak Kumar Chakrabarty, deputy secretary of the Energy and Mineral Resources Division, revealed that the highest usage of gas is in the electricity sector. The BCIC is supplied with 130 million cubic feet (MMCF) of gas daily, including 72MMCF for the Ghoraashal Polash urea fertiliser and 48MMCF for Karnaphuli Fertiliser Factory. After this, there is no way to provide any more gas, he said.

He, however, also mentioned that discussions will be held at the highest level of the ministry to evaluate if gas supply could be resumed to at least another fertiliser factory. 

Efforts to import 90,000 tonnes urea under G2G arrangement 

BCIC Chairman Saidur Rahman stated during the meeting that efforts will be made to import an additional 90,00 tonnes of fertiliser from a confirmed source under G2G (government-to-government) arrangement alongside the import of two lakh tonnes of urea through quotation tenders.

Complexities in import payments 

The meeting also discussed the problem with paying the import price of fertilisers. 

Due to not disbursing the subsidy allocations in a timely manner, daily interest on matured liability is increasing. As a result, banks are expressing reluctance to open LCs and the complexity of fertiliser import price and vessel hire charges from Bangladesh Bank is increasing. This may lead to potential disruptions in fertiliser imports as per the schedule, officials concerned told the meeting.

In this regard, the representative from the finance ministry told the meeting that the delay in subsidy disbursement is due to the inadequacy of funds.