Despite a price increase of Rs 50/bag effective from August 1, urea prices in Pakistan are around 60% cheaper than global levels owing to sufficient local capacity to meet the needs of agriculture sector. In the last seven months, like all major commodities, global urea prices have jumped by 57% from US$ 309 per ton FOB to US$ 484 per ton due to COVID induced supply chain disruptions. Meanwhile, the local market has been abundantly supplied and urea prices have remained relatively stable owing to sufficient production capacity. Industry players, including market leader Fauji Fertilizer Company (FFC), have only recently announced an increase in urea price from Rs 1718 to Rs 1768 for 50kg bag. According to industry sources, the fertilizer manufacturers were forced to make the price adjustment due to inflationary pressures and a major cash flow crisis emanating from the government’s failure to clear over Rs 57 billion in GST refunds and subsidy non-payments. Even after the price hike, urea prices remain flattish compared to 2012 levels and at a steep discount to import parity-based pricing, currently hovering around Rs 4,500 per bag. At a time when all major commodities have witnessed an unprecedented surge in the global markets, farmers in Pakistan have benefitted from significantly lower urea prices domestically due to the success of Fertilizer Policy 2001 and measures taken by the government last year. By offering incentivized gas-pricing, the Policy encouraged local urea producers to invest around Rs 162 billion for plant upgradation and ramping up capacity to around 7 million tons against an average demand of 5.8 to 6 million tons. The Policy has handsomely fulfilled its objectives of ensuring urea availability at competitive prices. Over the past seven months alone, the fertilizer industry has passed on a benefit of Rs 122 billion to the farmers as a discount against international rates and averaged significantly lower domestic urea prices over the past decade. Latest data of National Fertilizer Development Centre (NFDC) reveals that urea offtake witnessed a growth of around 7% during the first half of 2021. The sales surged to 2.83 million tons due to improved farm economics, stemming from uptick in crop output, better support prices and higher water availability. “We expect that offtake and prices of both urea and DAP will remain elevated in the latter half of CY21, following the momentum in 1HCY21, majorly because of better crop yield and thus higher purchasing power of farmers amid surging global commodity prices”, noted InterMarket Securities in its latest report on the fertilizer sector. Meanwhile, the farmers are still awaiting the implementation of targeted subsidy program on phosphatic fertilizers to ensure continued positive momentum of farm economics. International DAP prices have risen by around 56% this year to currently above USD 600/ton as a result of global commodity shortage and resultant uptick in prices. According to analyst Noor Huda of BMA Capital, “Since nearly 60% of DAP is imported in the country, local prices have also surged to new highs, hovering between PKR 5,700-5,800/bag to pass on the rising import costs.” The farmer community has urged the government to finalize DAP subsidy implementation and immediately disburse funds to support the global competitiveness of country’s agricultural sector. Under a special Kharif crop package, the Government had declared a DAP subsidy of Rs.1000 per acre for cotton and rice crops, but the initiative has failed to materialize due to lack of clarity on the implementation mechanism. Similarly, disbursements have not been made yet under PM Imran Khan’s Rs 100 billion Kamyab Kisan Program to promote agriculture, wherein the PM himself raised the phosphatic subsidy to Rs 1500 per acre.