The Ministry of Industries and Production has written a letter to Sui Northern Gas Pipelines Limited (SNGPL) for gas supply at a discounted rate to Agritech Limited and Fatima Fertiliser plants from July 26, 2020 in line with a cabinet decision.
Under the decision, Agritech and Fatima Fertiliser will run their plants from July 26 to October 27, 2020 in a bid to produce fertiliser to meet domestic demand.
The government’s share in gas tariff has been estimated by taking into account the notified rate for re-gasified liquefied natural gas (RLNG) for June, which will be approximately Rs959 million. Further payment by the government to SNGPL for price differential will vary due to the difference between monthly rates of RLNG.
National Fertiliser Development Centre (NFDC) has projected that the national urea inventory would be below 200,000 tons by the end of December 2020 and has advised the government to either import 200,000 tons or provide subsidy to the closed urea plants.
Sources said the cabinet ratified the decision of the Economic Coordination Committee (ECC) on gas supply to the two fertiliser plants at a discounted rate for a period of three months.
During discussion, the Ministry of Industries and Production pointed out that the decision required modification in dates for the three-month period for which gas supply would be offered to both fertiliser units as almost 10 days had already passed since the ECC’s decision. It was proposed that the period be calculated from July 26 to October 27, 2020.
The Ministry of Industries has conveyed the decision of the cabinet to SNGPL for gas supply at a subsidised rate.
The cabinet has approved RLNG supply at concessional tariffs to the two closed fertiliser plants for the next three months. Agritech and Fatima Fertiliser have remained closed due to unavailability of feedstock gas since December 2019.
A senior official of the industries ministry said the cabinet decision had been conveyed to SNGPL through an official letter for resuming gas supply to two fertiliser plants. He said the fertiliser companies had also been conveyed to make arrangements as by July 26 SNGPL would resume gas supply to their plants.
Fatima Fertiliser needs 45 million cubic feet of gas per day (mmcfd) and its fertiliser production capacity is 2,800 tons per day. Of the total, the share of urea production is 300 tons, calcium ammonium nitrate (CAN) 1,500 tons and nitro phosphate fertiliser 1,000 tons.
Agritech requires 28.5mmcfd of gas and can produce 1,200 to 1,300 tons of urea per day.
RLNG will be supplied to Agritech and Fatima Fertiliser at Rs756 per million British thermal units (mmbtu). This will include government’s share of Rs959 million, much less than the revenue spent previously on running these plants to produce urea to meet the shortage.
The government is also planning to increase RLNG consumption in power and fertiliser sectors to ensure smooth operation of the LNG supply chain.
The official said with the recently announced agricultural support package, increased wheat and sugarcane support prices and government’s plan to procure more grain from farmers this year, demand for fertiliser would definitely increase.
Farmers will consume additional fertiliser to produce bumper crops. Under the package, a subsidy of around Rs37 billion will be offered to the farmers on the purchase of fertiliser.
This will include a subsidy of Rs925 per bag of diammonium phosphate (DAP) and other phosphatic fertilisers and Rs243 per bag of urea and other nitrogen fertilisers.
COMMENTS
Comments are moderated and generally will be posted if they are on-topic and not abusive.
For more information, please see our Comments FAQ