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Govt decides to place fertilizer sector at par with export sector

27 Dec, 2021
A worker drains water from a gas filter at the Egas processing plant in Gujar Khan. Reuters/File
A worker drains water from a gas filter at the Egas processing plant in Gujar Khan. Reuters/File

The Federal Government has decided to place domestic fertilizer sector at par with export sector in gas supply priority list for three months, i.e., till March 31 2022, well informed sources told Business Recorder.

The decision has been taken at a time when the farmers across the country are facing severe problems in urea availability as hoarders are selling it at exorbitant rates.

According to a summary submitted to the ECC on December 16, 2021, the MoI&P informed that currently there are two urea plants network (namely Fatima Fertilizer and Agritech) and one DAP/ urea plant (namely Fauji Fertilizer Bin Qasim Limited) at SSGCL network.

The Ministry said due to the current priority order in place, FFBQL plant at SSGCL network during the current winter season would be experiencing low gas supplies and would go on Annual Turn Around (ATA) n Jan-2022 due to non-provision of system gas, as the system gas at SSGC would be diverted to other priority sectors. FFBQL has informed that if full 63 MMCFD gas is provisioned to them during the current Rabi season 2021-22, they will be adding an additional 90,000-100,000 tons of urea in the national stocks.

National Fertilizer Development Centre (NFDC) is projecting negative inventory for Urea fertilizer from Dec-2021 till Feb-2022. NFDC has further informed that due to high C&F prices for urea fertilizer, MoI&P may take up the matter with MoE (Petroleum Division) to make necessary arrangement for provision of additional gas/LNG to urea plants especially FFBQL.

“If system gas supplies are ensured to FFBQL, then inventory position with FFBQL producing 53,000 tons from Oct-Mar during the Rabi season 2021-22 would be around 0.1 million tons but the gas is not made available due to present merit order where supply to fertilizer sector has been placed after domestic use, exports and power use,” said the MoI&P in its summary.

The Ministry proposed that due to high international prices for fertilizer and also in consideration of food security, gas supply priority order may be revised with reference to fertilizer sector and fertilizer sector may be placed at par with domestic & commercial/ exporters as essential import substitution sector for SSGCL and SNCPL system gas supplies may be ensured to these plants during the current Rabi Season 2021-22 ensuring production of urea domestically.

The Ministry of National Food Security and Research, in its comments, stated that to avoid dependence on imported urea, MoI&P may ensure the availability of urea in domestic market through supply of additional gas to urea manufacturers such as FFBL, FFC and Engro during Rabi season.

Petroleum Division maintained that most of the fertilizer plants, having large market share in fertilizer manufacturing are on dedicated network, i.e., Fauji Fertilizer Ltd, Engro Fertilizer Ltd and Fatima Fertilizer Ltd with a cumulative gas demand of up to 582 MMCFD, whereas other plants like Fauji Fertilizers Bin Qasim Ltd, Pakarab Fertilizers Ltd, Fatimafert Ltd and Agritech Ltd were on the gas network of SNGPL and SSGCL with cumulative gas demand of up to 22l MMCFD.

The Petroleum Division maintained that for meeting the demand of fertilizer it would be in the national interest to effectively utilize indigenous installed capacity of fertilizer production which will help achieve the import substitution besides saving forex and subsidy and costly imports.

Petroleum Division supported the proposal of MoI&P with the stipulation that fertilizer sector may be placed at par with power and export in the gas supply priority order applicable on SNGPL and SSGCL network.

The MoI&P proposed that due to high international prices for fertilizer and also in view of the food security, gas supply priority order may be revised with reference to fertilizer sector, which may be placed at par with domestic and commercial/ exporters, as essential import substitution sector for SSGCL and SNGPL. System gas supplies may be confirmed to these plants, during the current Rabi Season 2021-22, to ensure immediate availability of the Urea Fertilizer and saving of foreign exchange, in case of import of Urea.

After detailed discussion, the ECC approved the proposal of MoI&P to place the fertilizer sector, at par with the export sector. It was further decided that the Ministry of Industries and Production shall, in consultation with the Petroleum Division, submit a review for reconsideration of the ECC in March, 2022.

The story was originally published in Business Recorder on December 27 2021.