Move to revive fertilizer industry, agriculture

Tariq Khattak

November 17, 2012

Fertilizer Industry

Islamabad—After spending over 1.2 billion dollars on importing over 2.2 million tons of urea from January 2011 to June 2012 and also offering over 60 billion rupees of subsidy on imported urea, Ministry of Finance is concerned about the increasing urea import bill which is becoming more expensive an option than importing diesel and furnace oil. Sources claimed that the decision to not to import further 3 lakh tons of urea for the current sowing season is a reflection of increasing dissent by Ministry of Finance.

Sources claimed that with the objections by Finance ministry and the election bells started ringing, the government is all set to focus on important sectors of economy which are directly related to rural and urban masses, the voters. The loadshedding issue being the priority number one is being looked after by jack of all arts Nargis Sethi while Dr. Asim Hussain has been assigned the task to solve the unending woes of fertilizer sector as farmers constitute the largest vote bank in Pakistan.

Sources claimed that Dr. Asim Hussain, Ahmed Mukhtar and Nargis Sethi are working out a comprehensive formula to solve the loadshedding issue as well as to bring down the urea prices in the country in next 3 months. The strategy is to solve the power sector issues to help the industry and masses and also to bring down urea prices by ensuring uninterrupted gas supply to SNGPL based fertilizer plants. Clarifying the misperceptions created by some vested interests that are propagating that Ministry of Power and Ministry of Petroleum and Natural resources are working in two different direction opposing each other’s policies, sources claimed that Dr. Asim Hussain, Ahmed Mukhtar and Nargis Sethi have been jointly assigned a task to workout a win-win situation for all the sectors of economy and they are putting their best to come up with a solution that would bring stability in economy and country.

The farmers are losing the benefit of hundreds of millions of rupees every month due to purchasing expensive urea due to gas curtailment in the country. Te urea Bag which was available at Rs. 800 per 40 kg bag in 2010 is now being sold at Rs. 1680 per bag due to massive gas curtailment to fertilizer plants on SNGPL network. Government cannot afford to import further urea by draining the precious foreign exchange, which is already very difficult to earn and farmers being the biggest vote bank must also be appeased by the government, hence, 2013 could bring some good news for Pakistan farmers as they can witness a substantial decrease in the urea prices before election, sources claimed.

To bring down the urea prices from current Rs. 1680 per 40 kg bag, the government is reconsidering its policy regarding fertilizer sector and Ministry of Petroleum and natural resources, after much deliberations, has finally come up with long-term and short-term solutions to solve the current fertilizer industry’s crisis.

In the long term plan fertilizer plants would be allowed to directly negotiate gas agreements with gas producers. Though fertilizer industry has agreements with SNGPL to provide them gas for 12 months in a year, the agreements with SNGPL didn’t work as SNGPL was forced by Government and powerful lobbies to provide them gas despite the fact they don’t have contracts for full year supply.

Sources in Islamabad claimed that Ministry of petroleum has proposed a pipeline of approximately 1000 KM which will cost US$ 300-400 million. According to a summary by Ministry of petroleum the laying of the pipeline will be done by gas utilities as third party contractors at a cost to be negotiated and OGRA will allow this income (O&M charges) to the companies.

The fertilizer industry which pays the largest amount of CESS tax of rupees 197 on feed gas will be adjusted in the cost of pipeline. This means the investment the fertilizer industry will make in terms of pipeline development will be adjusted against recovery of Gas Infrastructure Development Cess of the fertilizer industry.

Talking about the short term solution the sources claimed that if this summary is approved by the ECC, it will allow Engro’s new plant and Agritech to get off the SNGPL network and allow gas to be rotated to 2 plants – Pak Arab and Dawood Hercules – this is the best short term solution as it will ensure lesser plants are on rotation on the SNGPL network.

Earlier, Engro Fertilizer and Pakarab Fertilizer approached Ministry of Petroleum proposing allocating gas from Kunnar Pasaki Deep (KPD) field which at present is supplying around 120 MMCFD raw gas to SNGPL/SSGCL which will increase to 240 MMCFD in 2nd phase. Both the fertilizer plants demanded government to lay down the infrastructure and adjust its cost in Gas Infrastructure Development Cess being paid by fertilizer sector. They also demanded that any existing spare capacity available in system of Sui companies should also be utilized under TPA regime.

Since this proposal would take approximately 18 to 24 months to materialize and therefore it was considered imperative to work out an immediate interim solution to allow the plants to operate. In one of the proposed short term arrangement, Kandhkot gas field currently having a potential/allocation of 200 MMCFD gas to Guddu power station can supply additional 25 MMCFD gas for an initial period of 2 years.


Courtesy: Pakistan Observer

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