Official sources said, due to a price gap between the production cost of urea and its subsidised selling rate, the BCIC has been incurring an average financial loss of over Tk 200 crore a year for the last five years since the subsidies were not paid.

The BCIC is now handicapped in overhauling its aging factories six of which produce 18 to 20 lakh tonnes of urea, meeting roughly two-third of domestic yearly requirement.

The cash-strapped corporation's poor maintenance budget could hardly ensure round-the-year smooth operation of all the six state-run urea factories in the country, forcing the government to import urea from abroad at rates three times higher on an average.

For over two weeks now production at Zia Fertiliser Company Limited has been suspended due to mechanical faults, sources said recalling that Chittagong Urea Fertiliser Company (CUFL) was out of operation for a record 61 days last year.

It costs the BCIC Tk 6,000 to produce each tonne of urea in any of its six factories while the government's subsidy policy forces it to sell the same at Tk 4,800 a tonne creating a price gap of Tk 1200 in its disfavour.

Statistics show that over the last couple of fiscals the government raised its budgetary allocation for farm subsidy from Tk 300 crore to Tk 600 crore and then again from Tk 600 crore to Tk 1200 crore but things brought no good to the limping BCIC.

As the government is importing nine lakh tonnes of urea in addition to BCIC's projected production of 19 lakh tonnes to meet the growing urea requirement of 28 lakh tonnes in 2005-06, almost the total of farm subsidy will end up in meeting the huge price gap in imports. The cost of urea import is Tk 18,000 per tonne, and the government sells the same to farmers at Tk 4,800 creating an astounding price gap of Tk 13,200 per tonne.

Like in previous four years, in 2005-06 financial year also, the finance ministry is exhausting the whole amount of farm subsidy in paying off rebates to private phosphoric fertiliser importers and in subsidising the government's own urea imports.

Officials concerned at both the finance and the industries ministries agree that there are only two alternatives for bailing the BCIC out of the present liquidity crisis firstly, immediate payment of subsidies due to the corporation, and secondly, minimising the gap between its urea production cost and the selling price.

Seeing no prospect of the finance ministry paying off the dues, the industries ministry in late last year forwarded a proposal to the finance ministry asking to increase the market price of urea so that BCIC's loss is minimised.

But the finance ministry is sitting on that proposal considering severe backlash from the farming community as well as from urban consumers in the election year.

In 2001-2002, BCIC factories produced 15 lakh tonnes of urea and incurred a loss of Tk 180 crore as price gap due to non-payment of the subsidy, in the following fiscal it produced 20 lakh tonnes incurring a loss of Tk 240 crore again for the same reason and as this fiscal's projected output is 19 lakh tonnes, the corporation is set to count a loss of Tk 228 crore if the subsidy is not paid.

It now appears that due to the culture of not paying due subsidies, the more urea BCIC factories produce the more loss it incurs.

"If things keep on going like this for an unlimited period, aging BCIC factories will lose productivity leaving the government no other option but to import more urea at high international market rate that the country can ill-afford," said an official speaking on condition of anonymity.