Fertiliser or bomb?: Fatima Group says its product within accepted standards

Sole manufacturer of calcium ammonium nitrate changing bag and seed colour on US directive to increase traceability.

KARACHI:

The sole manufacturer of ammonium nitrate in Pakistan is cooperating with the US in taking measures to control its smuggling to Afghanistan where they admit, militants might be using it to make bombs, a top official of the company told The Express Tribune.

Fatima Group, which owns two companies producing the fertiliser, calcium ammonium nitrate (CAN), has been in talks with the US administration for the past couple of months, said chairman Arif Habib.

“We have already stopped supply to dealers in Khyber-Pakhtunkhwa to address US concerns,” he said. “But let me assure you, they haven’t asked us to stop manufacturing.”

The group’s companies Fatima Fertilizer and Pak-Arab Fertilizer together produce 600,000 tons of CAN annually, enough to make over 20 million improvised explosive devices (IEDs), according to estimates.

Ammonium nitrate was used in the bomb that blew up a government building in 1995 in Oklahoma city which resulted in 168 fatalities and then in the Bali bombings in 2002.

Chemical composition of CAN is 26% nitrogen, 13% nitrate, 13% ammonical, 10% calcium among others. CAN is often used as a substitute for ammonium nitrate, a fertiliser, according to Pak-Arab Fertilizer’s website.

Habib, a well-known Pakistani investor, said that there is the possibility that CAN may be used in making IEDs but so can a lot of other chemicals. Under US directives, the company has already changed the packing of the bags containing the fertiliser so it can be easily identified at the border, he said.

“Pakistan accounts for just 0.1% of the world’s total production of ammonium nitrate,” he said. “There are a lot of other countries in the region producing higher intensity ammonium nitrate like Iran and Uzbekistan.”

The company has also changed the colour of CAN grain on US insistence, he said. “We have sent them the samples. Now we are just waiting for them to approve the new colour as part of measures to curb its smuggling.”

The US Congress has passed a bill linking $700 million in aid to Pakistan with measures to stop smuggling of ammonium nitrate.

The decision has already started to take its toll on the manufacturer as its stock price has dropped 8.8% to Rs21.5 since Monday as investors fear the government may impose restrictions on the company. However, analysts say the chance of any ban is minimal.

Lakson Investments research head Hamad Aslam said the government cannot afford to cut ammonium nitrate sales. “Sales of CAN have been going up continuously especially due to urea shortage,” he added.

Pakistan’s annual demand for urea stands seven million tons while it is producing around 5.5 million, he said.

“CAN is the only fertiliser that can used as an alternate of urea. This is a need of our agriculture.”

Fatima’s CEO Fawab Mukhtar said that economic cost of not producing CAN in the country is greater than stoppage of US aid. “If we don’t produce it then we would have to spend $2.5 billion on import of fertiliser.”

CAN is the most suitable fertiliser for water-starved areas like Bahawalpur, he said. “It is wrong to single out us and Pakistan. This fertiliser is produced all across Europe and even in the US. It was used in the Oklahoma bombing and it took them 15 years for legislation in this regard, and it is still being manufactured there.”

Lakson Investments’ Aslam said that the probability of government restrictions on production are low but investors have their fingers crossed. “Pakistan is always a special case. World Bank will finance coal-fired power plants everywhere except Pakistan. So anything can happen here,” he added.

Published in The Express Tribune, December 16^th, 2011.