Pakistan may have the largest urea manufacturing plant in the world, but the gas shortage will force the country to import 1.2 million tons of urea, valued at $660 million, for the Rabi (winter) growing season in Punjab.
The state-owned gas companies – Sui Northern Gas Pipelines (SNGP) and Sui Southern Gas Company (SSGC) – are expected to cut off the supply to the domestic fertiliser manufacturers for two months in the winter, resulting in a domestic production shortage which will have to be made up for through imports.
Industries Secretary Aziz Ahmad Bilour chaired a meeting in Islamabad on Saturday in which it was decided that the ministry would seek approval from the economic coordination committee (ECC) of the cabinet for the import of urea.
The meeting had been called at the request of the Punjab government which anticipated a urea shortage for its winter growing season. It was attended by Punjab’s top civil servant, Chief Secretary Nasir Mehmood Khosa, as well as representatives from the federal ministries of commerce, finance, petroleum as well as SSGC and SNGP.
Sources familiar with the discussions said that two proposals were discussed: one that would import 1.2 million tons of urea, and another that would import a smaller quantity, closer to 700,000 tons.
Although the finance ministry has already given permission to state-owned trading companies – such as the Trading Corporation of Pakistan – to import the urea, it has not yet allocated enough financing. A finance ministry representative at the meeting said that the government had allocated only about Rs12 billion for fertiliser imports, against a projected need of Rs56 billion ($660 million).
In a bid to close the urea ‘gap’ the government is expected to import 300,000 tons in October and a similar amount in November before reassessing how much more needs to be imported in December.
Pakistan imported 375,000 tons of urea for the 2011 khareef (summer) growing season, more than twice the amount that the government had anticipated would be needed. The imports during the summer were meant to act a ‘strategic reserve’ expected to last Pakistani farmers till the winter season.
Pakistan has an installed domestic fertiliser production capacity that is close to the total expected demand, especially after Engro Corporation’s new plant in Deharki came online late last year. Yet the chronic gas shortage in the country has meant that those plants do not get the natural gas supplies that they need to function at peak capacity. Urea manufacturing relies on natural gas as a raw material.
Winter months are particularly difficult since domestic consumers in the northern part of the country begin using more gas to heat their homes. The gap between supply and demand on SNGP’s network – which covers most of Punjab and Khyber-Pakhtunkhwa – is estimated at 20%, though the supply to fertiliser manufacturers on the network is likely to be completely suspended in December and January.
The gap on the southern networks, covered by SSGC and the privately-owned Mari Gas, is somewhat smaller at around 12%.
Published in The Express Tribune, September 25th, 2011.
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Biggest example of ill planning ever in the history of the world
does this involve a subsidy?