PM suggests uniform gas tariffs for fertiliser

Prime Minister Shehbaz Sharif has directed officials to introduce uniform gas prices and mulled over a plan to put a tag on fertiliser bags.

The prime minister is also considering ending subsidised gas supply to fertiliser plants and extending direct subsidy to farmers through the Benazir Income Support programme (BISP).

Sources told The Express Tribune that a committee on gas supply, headed by Deputy Prime Minister Ishaq Dar, was working on uniform gas prices for fertiliser plants.

While considering the allocation of Mari gas to fertiliser manufacturers, the PM gave the directive to introduce uniform tariffs. He noted that a committee was already working on introducing such tariffs. In another meeting, chaired by the premier, a plan to allocate gas to the fertiliser plants was considered. Sources said that it was proposed to extend direct subsidy to farmers through BISP rather than providing subsidised gas to the fertiliser industry.

At present, the government is working on ditigising all sectors including petrol filling stations to compile data on oil supply and sales. This initiative has been taken in the backdrop of a proposal of the Federal Board of Revenue (FBR), which wants to closely monitor petroleum sales and purchase to curb tax evasion. In the fertiliser sector, the farmers are facing an artificial increase in prices due to dumping of stocks by dealers. There were also reports of tax evasion in the industry.

The planned tagging of fertiliser bags will help government authorities to gather sales and purchase data and keep a close watch on stocks. It will also assist the FBR in checking tax evasion.

In a recent meeting, the cabinet ratified a decision of the economic decision-making body to allocate gas from a field of Mari Energies to the fertiliser plants. The meeting was informed that the Economic Coordination Committee (ECC) had approved the supply of locally produced gas to three fertiliser plants from Mari's new reservoirs, namely Ghazij/ Shawal. Engro's base fertiliser plant on Mari network will get gas from Sui Northern Gas Pipelines Limited (SNGPL). It was pointed out that Mari Energies was producing and supplying gas from four reservoirs, which included Habib Rahi Limestone, Sui Upper Limestone/ Sui Main Limestone, Ghazij/ Shawal and Goru-B Deep.

Earlier, the Mari management raised the issue of allocating gas to the fertiliser sector, saying it was facing circular debt, which stifled work on energy projects. The company said that it required substantial finances to execute plans of drilling offshore fields but noted that the circular debt was haunting its investment outlook. It said that the prevailing circular debt did not allow the company to undertake an investment of over $1 billion for full-scale development of the Ghazi Ghaisakhori field. At present, the country is facing a circular debt of Rs2.6 trillion.

Mari Energies is pushing the government to allocate gas to the fertiliser sector, adding that it is unable to invest around $1 billion for the development of Ghazi Ghaisakhori field without assurance of sustainable gas offtake and timely payments by buyers.

In a letter, the company said a recent study conducted by Wood Mackenzie indicated a substantial decline in gas demand on the network of public utilities, particularly from the power sector. It observed that higher tariffs and a levy on captive power plants had further constrained system demand.