Gas outages: Ministry of industries seeks exemption for fertiliser sector

The country will require $660 million for import of 1.2 million tons of urea to meet domestic requirements.


Zafar Bhutta August 25, 2011

ISLAMABAD:


The ministry of industries has requested Prime Minister Yousaf Raza Gilani to exempt fertiliser plants from gas load-shedding, sources said on Thursday.


Fertiliser plants are likely to remain closed for four months in the winter due to shortage of gas, they said, adding that the gas shortage could lead to further imports of urea, costing the country $660 million.

Fertiliser plants powered by Sui Northern Gas Pipelines Limited (SNGPL) will remain closed from August 28 to September 17. In addition, they will face gas suspension for three months on account of gas load-shedding from January 1 to March 31 next year.

Sources said that the ministry had informed the prime minister that the country would have to import 1.2 million tons of urea due to gas load-shedding for fertiliser plants in the Rabi season, which started in October and ended in April every year.

“At present, the cost of imported urea is $550 per ton. The country will require $660 million to import 1.2 million tons of urea to meet domestic requirements in the upcoming Rabi season,” one source said. Furthermore, sources said that the imported urea would cost Rs3,000 per bag in the market. Sources also said that the government would have to bear the subsidy of Rs1,615 per bag, which would be in addition to $660 million it would spend on the import of urea.

“The ministry of industries has asked the prime minister to exempt fertiliser plants from gas load-shedding in the upcoming winter season so that they can be operated at full capacity to meet local requirements,” another source said.

The ministry of industries has not received any response from the prime minister so far, the source added. “If the plants are allowed to operate at full capacity, the country will need no extra import of urea in the Rabi season.”

The fertiliser industry has also proposed that the government should suspend gas supply to the general industry for three months in the winter to save 500 million cubic feet per day (mmcfd).

The other proposal the fertiliser industry has made is to increase gas load-shedding for CNG stations in the winter to save 75 mmcfd.

Sources in the fertiliser industry say that due to the low production of urea, there will be a revenue loss of Rs40 billion to fertiliser companies while the national exchequer will lose Rs10 billion in taxes.

The price of urea has gone up to over Rs1,700 per bag from last year’s Rs700 per bag. Any import of urea will result in further increase in the urea price.

The urea shortage has led to black marketing, as farmers are now paying between Rs1,800 and Rs2,000 per bag. This may lead to higher prices of crops, fuelling inflation.

Published in The Express Tribune, August 26th,  2011.

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