The interim government on Tuesday decided to continue the supply of subsidised gas to two fertiliser plants for another six months but put off a decision on import of 200,000 tons of fertiliser, leaving a shortfall that could hit the wheat crop.
The Economic Coordination Committee (ECC) of the cabinet could not make a decision on an increase in the price of gas being supplied to six fertiliser plants by Mari Petroleum Company Limited (MPCL). The indecisiveness by Finance Minister Dr Shamshad Akhtar-led cabinet committee may cost the company Rs17 billion in the current fiscal year.
“The ECC directed the Ministry of Energy to continue the supply of gas to all fertiliser plants to ensure sufficient supply of fertiliser in the market,” said the Ministry of Finance in a statement. The ECC made the decision about extending the supply of subsidised gas to two urea plants on the instructions of the apex committee of the Special Investment Facilitation Council (SIFC).
SIFC, in its fifth meeting, had directed the Ministry of Industries to ensure the uninterrupted supply of gas to two fertiliser manufacturing companies using the system gas of SNGPL till March 2024 for import substitution.
The extension will help lower the import of fertiliser by 300,000 tons, still leaving an anticipated shortfall of 200,000 tons for the Rabi sowing season 2023-24.
The finance ministry’s statement was silent on the subsidy that would be required to provide cheaper gas and whether any decision was made for the import of 200,000 tons of urea to fill the gap.
The ministry stated that the ECC decided to constitute an inter-ministerial committee with representation from the ministries of finance, planning, commerce, food security, industries, power and energy, which would come up with recommendations for the allocation and pricing of gas for the fertiliser industry.
It decided to extend the subsidised gas supply to Fatima Fertiliser, Sheikhupura, and Agritech till March 31, 2024.
There was an anticipated shortfall of 500,000 tons of fertiliser for wheat crop sowing in case supplies were disconnected in winter, according to officials of the Ministry of National Food Security.
A summary was also tabled for an increase in gas prices for the six fertiliser plants that were getting gas from MPCL. It had been proposed that the price of feedstock may be increased from Rs302 per mmbtu to Rs580, a rise of 92%.
Similarly, there was a proposal to increase the fuel stock gas price from Rs1,025 per mmbtu to Rs1,580, a hike of 54%.
The six plants included four plants of Fauji Fertiliser and Fatima Fertiliser.
The ECC was informed that the delay in decision on increasing gas prices would result in a Rs17 billion loss to the company during the current fiscal year in the shape of negative differential margins. The proposed increase would have resulted in a rise of Rs500 per bag in urea prices.
The Ministry of Finance did not respond to the question on whether the ECC decided to import 200,000 tons of fertiliser. It also did not respond to the question regarding the subsidy needed to continue supplies till March next year.
The ministry’s statement said that the ECC discussed and reviewed the performance and trends of key economic indicators including the Consumer Price Index (CPI) of various essential items presented by the Ministry of Planning, Development and Special Initiatives.
The ECC decided to constitute a core group comprising the secretary planning, commerce, food security and industry with the mandate to present concrete proposals for monitoring and advising the ECC on prices of essential commodities as well as maintaining the stocks of strategic products. The ECC also discussed in detail the first-ever telecom infrastructure sharing framework and approved it.
Published in The Express Tribune, October 4th, 2023.
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