Unjust gas distribution: Big players make gains during curtailment regime
Small players facing bankruptcy, Petroleum minister says.
ISLAMABAD:
The gas supply to the fertilizer industry on a preferential basis has forced small players to go bankrupt but has provided an opportunity to the big players to make windfall gains of Rs44.72 billion during first nine months in gas curtailment regime.
Profits of all the big players in the industry except Engro doubled in gas curtailment regime during the current calendar year compared to the same period last year.
The main factor behind this increase in earnings has been the frequent increase in the prices of fertilisers. Now the government is planning an audit of the sector.
When contacted, Federal Minister for National Food Security and Research Mir Israrullah Zehri criticised fertiliser companies for making windfall gains. He said “I will take up the issue before Cabinet to conduct audit of these companies that have been reaping these huge profits.”
He said that prices of urea stood at Rs790 per bag in January 2011 that had shot up to Rs1,800 per bag now. He said that these companies were also getting subsidy on gas but still selling fertiliser at higher rates. “The high prices of fertiliser will also affect the prices of wheat causing hike in prices of all food items,” he said but ruled out any food crisis due to high prices of fertiliser. At present, farmers are forced to buy urea at rate of Rs2,200 per bag and di-ammonium phosphate (DAP) at Rs5,000 per bag.
According to official break up made available to The Express Tribune, fertiliser companies had earned Rs22.57 billion profit before tax during January-September 2010 before gas-curtailment. But their profit after tax rose to Rs 44.72 billion during the period of January-September 2011 in gas curtailment regime.
Engro profits increased by 49 per cent, Fauji Fertilizer Corporation (FFC) 102 per cent, Fauji Fertilizer Bin Qasim Limited (FFBL) 153 per cent, Pak Arab 90 per cent and Fatima Fertiliser profit also jumped phenomenally during the first nine months of current calendar year compared to corresponding period last year 2010.
However, two fertilizer companies - Agritech and Dawood saw sharp declines in earnings during the period under study.
Engro profit stood at Rs5.33 billion, FFC Rs20.7 billion, FFBL Rs10.89 billion, Pak Arab Rs4.94 billion and Fatima Rs2.42 billion. The profit of Dawood Company declined to Rs416 million compared to Rs1.27 billion in year 2010. Agritech faced a loss of Rs981 million.
When contacted Petroleum Minister Dr Asim Hussain said “Yes, there is unequal distribution of gas supply in the fertiliser sector and therefore the government will conduct energy audit of fertiliser companies.”
Due to higher prices of fertiliser, Hussain has also proposed imposition of Fertiliser Equalisation Levy (FEL) on fertiliser plants running on gas in a bid to crack down against the windfall gains being earned by them. Hussain is of the view that imposition of levy would cause a reduction in fertiliser prices by Rs400 per bag.
The petroleum minister has also proposed to regulate the prices of urea as the fertiliser plants were getting gas on cheaper rates but the fertiliser was being provided to the farmers at highest rates.
Published in The Express Tribune, November 21st, 2011.
The gas supply to the fertilizer industry on a preferential basis has forced small players to go bankrupt but has provided an opportunity to the big players to make windfall gains of Rs44.72 billion during first nine months in gas curtailment regime.
Profits of all the big players in the industry except Engro doubled in gas curtailment regime during the current calendar year compared to the same period last year.
The main factor behind this increase in earnings has been the frequent increase in the prices of fertilisers. Now the government is planning an audit of the sector.
When contacted, Federal Minister for National Food Security and Research Mir Israrullah Zehri criticised fertiliser companies for making windfall gains. He said “I will take up the issue before Cabinet to conduct audit of these companies that have been reaping these huge profits.”
He said that prices of urea stood at Rs790 per bag in January 2011 that had shot up to Rs1,800 per bag now. He said that these companies were also getting subsidy on gas but still selling fertiliser at higher rates. “The high prices of fertiliser will also affect the prices of wheat causing hike in prices of all food items,” he said but ruled out any food crisis due to high prices of fertiliser. At present, farmers are forced to buy urea at rate of Rs2,200 per bag and di-ammonium phosphate (DAP) at Rs5,000 per bag.
According to official break up made available to The Express Tribune, fertiliser companies had earned Rs22.57 billion profit before tax during January-September 2010 before gas-curtailment. But their profit after tax rose to Rs 44.72 billion during the period of January-September 2011 in gas curtailment regime.
Engro profits increased by 49 per cent, Fauji Fertilizer Corporation (FFC) 102 per cent, Fauji Fertilizer Bin Qasim Limited (FFBL) 153 per cent, Pak Arab 90 per cent and Fatima Fertiliser profit also jumped phenomenally during the first nine months of current calendar year compared to corresponding period last year 2010.
However, two fertilizer companies - Agritech and Dawood saw sharp declines in earnings during the period under study.
Engro profit stood at Rs5.33 billion, FFC Rs20.7 billion, FFBL Rs10.89 billion, Pak Arab Rs4.94 billion and Fatima Rs2.42 billion. The profit of Dawood Company declined to Rs416 million compared to Rs1.27 billion in year 2010. Agritech faced a loss of Rs981 million.
When contacted Petroleum Minister Dr Asim Hussain said “Yes, there is unequal distribution of gas supply in the fertiliser sector and therefore the government will conduct energy audit of fertiliser companies.”
Due to higher prices of fertiliser, Hussain has also proposed imposition of Fertiliser Equalisation Levy (FEL) on fertiliser plants running on gas in a bid to crack down against the windfall gains being earned by them. Hussain is of the view that imposition of levy would cause a reduction in fertiliser prices by Rs400 per bag.
The petroleum minister has also proposed to regulate the prices of urea as the fertiliser plants were getting gas on cheaper rates but the fertiliser was being provided to the farmers at highest rates.
Published in The Express Tribune, November 21st, 2011.