Farm production would suffer colossal losses unless the government provides another Tk 600 crore in farm subsidy, most conservative official figures show.

Of the Tk 1200 crore budgetary allocation as farm subsidy, Tk 396 crore would go straight away to private fertiliser importers as rebate for marketing non-urea chemical fertilisers -- TSP (triple super phosphate), MoP (murate of potash) and DAP (di-ammonium phosphate) -- for farmers at 25 percent subsidised rate.

The remaining Tk 800 crore is far short of the amount needed to cover the huge losses the public sector would incur in producing and purchasing 28 lakh tonnes of urea to meet the requirement this fiscal year (2005-06).

With the government purchasing nine lakh tonnes of urea, nearly one third of the total demand, from Karnaphuli Fertiliser Company Limited (Kafco) and international market at much higher price, at least Tk 1,416 crore in subsidy on urea is required, official statistics show.

Production by six state-run urea fertiliser factories is projected to be 19 lakh tonnes this fiscal year, forcing the government to procure nine lakh tonnes at the international market price, three times the domestic production cost.

Production cost of urea in the BCIC (Bangladesh Chemical Industries Corporation)-run factories is Tk 6,000 per tonne while the government has to purchase it from Kafco and global market at Tk 18,000 per tonne.

The BCIC has to sell urea at Tk 4,800 per tonne following a government decision to provide farmers with chemical fertilisers at subsidised rate.

This would cause the BCIC to incur a loss of Tk 228 crore from the sale of 19 lakh tonnes of urea it would produce and another Tk 1,188 crore by selling nine lakh tonnes procured at global market price.

This shows a subsidy requirement of Tk 1,416 crore with around Tk 800 crore available for the purpose.

Sources at the agriculture and industries ministries say if additional allocation is not made, the BCIC would be unable to import required quantity of urea, posing a threat to agricultural production.

Industries Minister Motiur Rahman Nizami had told the press earlier that the deficit of urea would be met by purchasing 3.5 lakh tonnes from Kafco and importing 5.5 lakh tonnes.

Agriculture ministry sources mentioned that out of the annual requirement of 28 lakh tonnes of urea, 11 lakh tonnes are needed during the peak season (January-March) alone.

BCIC officials however hope there would be no shortage of urea in this peak season as it has got a carryover of over three lakh tonnes, procured three lakh tonnes from Kafco and imported two lakh tonnes. Besides, tender has been floated for import of another 50,000 tonnes.

If funds are not made available, they fear, the post-peak season (April-June) might see a supply shortage of urea.

While the BCIC has to maintain proper supply of urea in the market, its ageing factories are subjected to negligence in periodic maintenance, resulting in disruption of production frequently.

Chittagong Urea Factory Ltd was out of operation for over 40 days last year while Zia Fertiliser Company Ltd has just resumed production after several days of closure due to mechanical faults.