Govt may provide $400m to fertiliser companies

Published: September 23, 2012
they will now receive gas supply directly from different gas fields, without having to rely on gas utilities. PHOTO: FILE

they will now receive gas supply directly from different gas fields, without having to rely on gas utilities. PHOTO: FILE

they will now receive gas supply directly from different gas fields, without having to rely on gas utilities. PHOTO: FILE
Fund meant for gas import projects to now be used for transmission network. DESIGN: JAMAL KHURSHID

A plan to provide $400 million from receipts of the Gas Infrastructure Development Cess (GIDC) to fertiliser firms is under study, in order to subsidise the building and laying of gas transmission lines. The GIDC is a tax imposed on gas consumers, to generate funds meant for gas pipelines and LNG import projects.

The plan will help save fertiliser plants from the impact of load-shedding; they will now receive gas supply directly from different gas fields, without having to rely on gas utilities.

The move is likely create controversy, as the GIDC was imposed on gas consumers to fund gas pipeline projects of national importance, following US opposition to the Iran-Pakistan gas pipeline project and subsequent backing out of donors and financiers. A part of the revenues raised under the tax was also meant to finance LNG import projects, and the Turkmenistan-Afghanistan-Pakistan-India gas pipeline project. The government now seems ready to utilise the funds to subsidise fertiliser manufacturers.

At present, as progress on these projects remains sluggish, the Ministry of Petroleum has now agreed to a proposal put forth by the fertiliser industry; which asked for funds for a transmission and distribution network from dedicated sources of gas.

Sources told The Express Tribune that the Economic Coordination Committee (ECC) of the Cabinet is expected to consider the proposal in its upcoming meeting next week.

Fertiliser firms have supported the plan, which will divert gas to their plants from dedicated fields controlled by the Oil and Gas Development Company (OGDC), Mari Gas and MOL Pakistan. Under the plan, the petroleum ministry has proposed to dedicate supply of 202 million cubic feet of gas per day (mmcfd) to the fertiliser industry. OGDC will dedicate 130mmcfd gas from the Kunnar Pasakhi Deep field; 15mmcfd from OGDC’s new Bahu field; 10mmcfd from OGDC’s new Reti Maru field; 22mmcfd will be provided by the Mari Gas Company; and 25mmcfd will be diverted from MOL’s Makori East Tal Block.

The ECC, in its meeting held on August 16, 2012, had approved the petroleum ministry’s proposal to allocate gas from existing or new discoveries for the fertiliser sector, especially the four fertiliser plants on the Sui Northern Gas Pipelines (SNGPL) system.

The ECC had also directed the finalisation of a detailed plan in consultation with relevant stakeholders for the submission of a summary for approval. The Ministry of Petroleum had initiated a consultative process with various stakeholders to finalise the plan, which is now ready to be tabled before the ECC for approval.

“The fertiliser industry has projected a cost of $300-400 million, for the entire 1,000 kilometre pipeline to be laid by gas utilities, including SNGPL and Sui Southern Gas Company Limited,” a source in the fertiliser industry said; adding that the operating and maintenance cost of the pipeline will be recovered from gas consumers. The Oil and Gas Regulatory Authority will require an amendment in rules to allow the income on account of operating and maintenance costs.

“Investment made by the fertiliser plants will be adjusted against recoveries of the Gas Infrastructure Development Cess (GIDC),” he added. Industry sources said that the entire transmission system – including compression and allied facilities – will be set up by the four fertiliser plants on the SNGPL system. These plants include Engro Fertilizers, Pakarab Fertilizer, Agritech and Dawood Hercules Fertilizers. Dawood Hercules, one of the entities most affected by frequent gas closures to the industry, has recently announced the sale of Dawood Hercules Fertilizers to Pakarab Fertilizer.

Published in The Express Tribune, September 23rd, 2012. 

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Reader Comments (11)

  • just_someone
    Sep 23, 2012 - 6:35AM

    this is complete and utter theft. the money has been paid by consumers to ensure gas supply and infrastructure, not to have the money help a small group of companies and owners. this money should be used for big projects that supply gas to the mass consumers and not a select group that has bribed enough govt officials to steal the people’s money.
    and then people complain that the SC keeps stopping ‘economic progress’ projects. this is blatantly theft and i expect the SC to take notice of it unless the fertilizer owners have paid enough money to the judges also.


  • Bilal Moti, Arif Habib Securities
    Sep 23, 2012 - 9:59AM

    Another attempt to benefit Engro.


  • Affan
    Sep 23, 2012 - 1:02PM

    If fertilizer companies really interested in laying of gas pipeline.. y dnt they use some part of thr huge profits…. y using money collected from us.. Strange money collected from us bt cnt b use fr our benefit… i live in lahore.. n i have to use cylinder from november to march


  • Abdul Aleem
    Sep 23, 2012 - 2:52PM

    Affan the companies who are interested in laying gas pipeline, are running into losses. The only companies who are in profit, are the ones already having dedicated supply.


  • Bhatti
    Sep 23, 2012 - 4:21PM



  • Taxed
    Sep 23, 2012 - 9:12PM

    @Bilal Moti, Arif Habib Securities:
    You are biggest beneficiary of this theft please give back the money you stole when your principal closed the market for 100 days


  • Farman Lodhi
    Sep 23, 2012 - 10:52PM

    its not a group of fertilizer companies that will benifit from this proposition, its the farmer community and the tax payer that will. prices of urea in the last year and a half have gone up from under Rs 1000 a bag to Rs 1800 as companies who invested heavily to bridge the gap between local supply and demand had no other choice but to raise prices to repay their debt. who in the end is paying for this price hike? when government imports urea at 2700 Rs a bag and sells it for 1400 to dealers who do you think is paying for the subsidy? its the tax payer…people like us. a million ton of urea has been imported in the country since last year resulting in a wastage of billions of rupees of our money in subsidies. all of this despite having idle manfucturing capacity available is not sanity. in the current situation where IP or TAPI are distant dreams, this is the best utiisation of this money for our economyRecommend

  • Wellwisher
    Sep 24, 2012 - 10:27AM

    Agree to Mr. Farman , it would only give benifit to the farmers and hence the whole food chain until consumer, still there are some senseless people that would support to let the gas burn in domestic burners and CNG cars, what a pity , we have been blessed with such huge reserves of gas, wasting the treasure in cooking food and driving cars .
    Pakistan needs a bold leadership to take a step against this ! to utilize the gas for power generation + chemicals , the best and most productive use , while alternatives could be sought for current uses.


  • Affan
    Sep 24, 2012 - 4:06PM

    TAX payer and Farmer are two different thing… farmers are not tax payer in this country… How west cook thr food..?? Wt west do for heating.. they burn same gas fr heating n to cook thr food.. itz nt wastage.. nxt time u can say y giving electricity to houses y nt industry.. cz thrz wastage in giving electricity to houses.. wt they do watch tv n use fan ac’s complete wastage..


  • Abbas
    Nov 3, 2012 - 5:08PM

    This is being done after the front men of the man at the top have forced Hussain Dawood to sell Dawood Hercules, Jehangir Siddiqi to sell Agritech. In addition the front men have also aquired 25% of Engro.

    Therefore all of Pakistan’s fertilizer industry is now controlled by the Top Man, except for Fauji Fertilizer. This is not being done for the farmers of Pakistan, please everyone this is Pakistan today. Nothing is done for the people by the current regime. Everything is being done to plunder this nation. Zulfiqar Bhutto did nationalization which was a flawed policy. However all units that were taken over, became the property of the nation. This is zardarization, where pressures and conditions are created to force businessmen to sell out to the team of front men deployed by the man at the top.

    It’s a shame that the Army is allowing this to happen.Recommend

  • Nawaz
    Nov 20, 2012 - 5:20PM

    I agree with Abbass. I work for the ministry of Finance and can’t believe what is happening in this county. This country is being looted and seems like everyone is waiting for some miracle to happen. I am leaving my job here and going to work for the WB. Cant take this place anymore. People just love to complain and do nothing about the problems we all are facing. For a start i would like to tell my countrymen start voting. And then maybe after that you might see some real positive change in this country. God Bless Pakistan. And i hope and pray daily that PTI comes to power as everyone else who has ever been in power has only thought of how to loot this country. Talking from experience as i have worked for the Ministry of Finance for over 16 years now and have seen the true colors of all these parties who have ruled us. We all have two options 1 is to vote for change and the other is to leave the country. Just get out of this banana republic as soon as possible. I have made my decision and leaving my motherland as i can’t see the people of Pakistan to rise up like the brave Egyptians or the Libyans.I hope i am wrong in what I’m saying and change comes soon rather then later.


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