Production resumes as idle fertiliser plants get gas supply

Earlier, the industry was anticipating a shortfall of 400,000 tons

Bilal Hussain September 26, 2018

A farmer sprays liquified fertiliser over a rice field. PHOTO: REUTERS

KARACHI: Idle fertiliser plants have started receiving gas supply and Agritech has resumed operations while Fatima Fertiliser is likely to begin production soon as the industry gears up to produce urea ahead of the Rabi sowing season.

The industry was anticipating a shortfall of 400,000 tons of fertiliser. To bridge the gap, the government restored gas supply to the idle plants, which are expected to contribute 300,000 tons.

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To meet the remaining shortage of 100,000 tons, the government has permitted import of up to 100,000 tons of urea.

“Hopefully, the strategy of bridging the 400,000-ton gap will not let the fertiliser crisis happen,” Pak-Kuwait Investment Company AVP Research Adnan Sami Sheikh told The Express Tribune.

“The industry expected prices to swell due to the crisis, but instead gas supply has been restored and import of 100,000 tons has been allowed, so price hike will not take place.”

However, Sheikh added that the fertiliser price of around Rs1,600 per bag would increase in October by Rs100-150 as companies would start passing on the impact of higher gas prices to the consumers.

He said two plants - Agritech and Fatima Fertilizer - would be able to jointly produce 300,000 tons. “Shortage of local gas and high prices of imported liquefied natural gas (LNG) have created major challenges for the sector,” he pointed out.

Elixir Securities’ research analyst Sharoon Ahmed said had domestic production not been supported, the shortage of urea would have occurred, forcing costly imports and increasing price volatility at a time when the country was facing a tough economic environment due to the rising current account deficit.

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Pakistan’s fertiliser industry has the capacity to meet national demand if the cost of production remains within viable limits.

According to an industry source, gas is provided to the fertiliser sector at a much lower rate internationally compared to Pakistan. It is $4.78 per mmbtu in Pakistan while internationally it is between $2 and $3 per unit.

Published in The Express Tribune, September 26^th, 2018.

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