Fauji Fertilizer Company (FFC) is planning to set up new DAP plant on concessionary rates in a bid to boost local production to meet shortfall.
FFC is a sister company of Fauji Fertilizer Bin Qasim Limited that is producing DAP locally.
In this regard, the Fauji group approached the Petroleum Division seeking government commitment of 30mmcfd natural gas at a concessionary rate of $0.77 per mmbtu for the first 10 years as it planned to set up a new DAP production plan for a total of 20 years under the Fertilizer Policy 2001.
The Fauji Group is currently involved in manufacturing urea and DAP fertiliser. It produced three million tons of urea in 2020 and 750,000 tons of DAP. Fauji Group is the only DAP manufacturer in Pakistan and the country meets its rest of the demand through imports.
The current demand for DAP in the country stands at 2.2 million tons of which 800,000 tons is met through domestic production and the rest is fulfilled through imports. Pakistan's annual import bill due to these imports stands at $570 million at the current DAP price of $410 per ton.
By using 30mmcfd, Fauji Group will be able to produce approximately one million tons of DAP that would result in significant decline in the country's import bill.
After commissioning of the new DAP plant majority of the demand will be met through domestic production and only Trading Corporation of Pakistan (TCP) would be allowed to import the shortfall to maintain stability in prices and provide relief to farmers as in the case of urea.
DAP prices soared to Rs4,550 per bag from Rs3,500 per bag in the domestic market due to shortfall during the wheat sowing season in the wake of lower imports by traders amid the lockdown when prices were at historic lows. Meanwhile, global prices are rising due to short availability of product as production in China has declined due to coronavirus induced lockdowns.
Pakistan normally imports majority of its DAP shortfall requirement from China but this time companies are importing the expensive product from Gulf suppliers due to short availability of products internationally. One of Pakistan's largest DAP traders; Engro Fertilizer Limited, recently imported 33,000 tons of DAP from Saudi Arabia.
The Petroleum Division has submitted the company's proposal regarding setting up a new DAP plant to the Economic Coordination Committee (ECC). The concessionary tariff of $0.70 per mmbtu is currently being availed by Fatima Fertilizer and Engro Fertilizer Limited.
The Petroleum Division said that FFC wanted the same tariff for the new plant that Fatima Fertilizer and Engro were availing.
Published in The Express Tribune, January 29th, 2021.
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