The country has six government-owned factories to produce this major fertiliser but no other factory has been set up in the last 16 years to put an end to the highly expensive import.

The demand for urea has risen sharply due to rapid expansion of irrigated boro cultivation over the last one decade, resulting in a huge government spending on the subsidy.

"Government has to spend Tk 1,200 to 1,300 crore a year to meet the gap between the import price of urea and the price at which it sells this fertiliser. But setting up of two more urea factories could save up to Tk 1,500 crore a year. The amount spent on subsidy for three years is enough to set up a urea factory in the country", Chairman of Bangladesh Chemical Industries Corporation (BCIC) Major General (retd) Imaam-Uz Zaman told The Daily Star.

The BCIC-run six urea factories can produce up to 19 lakh tonnes of urea a year while the demand for it stands at 28 lakh tonnes.

This year the government is importing up to nine lakh tonnes of urea at the international market price of Tk 18,000 per tonne as against BCIC's production cost of Tk 6,000 per tonne. The government sells urea at a subsidised price of Tk 4,800 a tonne.

The subsidy spending is Tk 13,200 for each tonne of imported urea (import cost Tk 18,000 and sale price Tk 4,800) but the government does not compensate the BCIC for the loss it incurs in selling urea at Tk 4,800 a tonne, which is Tk 1,200 less than production cost.

"The government pays fat bills to meet the price gap but it does not provide the subsidy money to BCIC. With its ageing urea factories, BCIC is facing fund crisis for their maintenance," said Imaam-Uz Zaman. The factories are losing productivity operating year after year without proper maintenance, he added.

"No urea factory has been set up since 1990, when the biggest one in the country -- Jamuna Fertiliser Factory -- was built in Jamalpur. The first one -- Fenchuganj Fertiliser Factory --was set up 42 years ago."

The six urea factories produced 20 lakh tonnes last fiscal year, he said. "I doubt whether we'll be able to produce 18 lakh tonnes this year."

Jamuna factory has gone out of production for the third time in the last six months.

"We don't get money in time for overhauling the factories. All the factories are making losses. We're deprived of our subsidy bills. Government's subsidy allocation is entirely eaten up by imported urea," said the BCCI chairman. If things go on like this, local urea production would dwindle further, he feared.

When contacted, industries ministry sources said the proposed move for expansion of the joint venture Karnaphuli Fertiliser Company (Kafco) would result in an increase in urea production but that would be of no significance for the country since it has to buy Kafco fertiliser at international market price.

Sources in the ministry and BCIC said the government has bought three lakh tonnes of urea from Kafco this fiscal year at a rate of Tk 18,000 per tonne.