Gas shortage: Fertiliser manufacturers claim losses of nearly Rs5b

Revenues have declined 31%, profitability by a whopping 139%.

LAHORE: In the first nine months of 2012, Sui Northern Gas Pipelines (SNGPL)-based plants, which include Agritech, DH Fertilizers, Pakarab, Engro’s new EnVen plant, as well as Sui Southern Gas Company (SSGC)-based Fauji Fertilizer Bin Qasim lost profitability by 139% and incurred a collective loss of Rs4.8 billion.

The same manufacturers had recorded a collective profit of Rs12.3 billion in the first nine months of 2011, says a release issued by the Fertiliser Manufacturers Pakistan Advisory Council (FMPAC) here on Tuesday.

During the period under review, all SNGPL-based plants and SSGC-based FFBL faced a 31% loss in revenue compared with the same period of 2011. They collectively generated total revenues of Rs44.5 billion in the first nine months of 2012, as compared to last year’s Rs64.3 billion.

During the timeframe, all SNGPL-based plants collectively suffered a loss of revenue of Rs10.1 billion, compared to the same period of 2011, due to gas curtailment and lower urea sales. Total urea sales by SNGPL-based plants stood at 216,000 tons, which is 346,000 tons less than the 562,000 tons of urea sold in the first nine months of 2011, indicating a 62% volumetric decline in sales.

Total urea produced by SNGPL-based plants in the first nine months of 2011 stood at 564,000 tons, which has declined 60% to 226,000 tons in the same period of 2012. SNGPL-based plants have operated at only 13% of installed capacity in 2012, as compared to 33% last year.

According to a FMPAC official, SNGPL-based plants are facing the worst-ever crisis in their history. Gas outages went in excess of an unprecedented 200 days in the first nine months of the calendar year. The official said that despite an investment of over $2.3 billion in new production capacity, the country is sitting on idle urea capacity of 2.7 million tons.

Fertiliser sector officials warned that if the same level of gas curtailment continues during 2013, SNGPL-based fertiliser plants will be forced to shut down permanently – resulting in the layoff of highly-skilled manpower. They also warned that the exchequer will feel the pressure once it is forced to import urea to meet the shortfall in the country.

“It is not just fertiliser plants that will face the brunt of industry closure: the whole farmers’ community as well as the government would be the ultimate losers if fertiliser plants are shut down,” an official claimed..

He said the government needs to support the fertiliser industry to ensure the supply of cheap local urea to farmers.

Published in The Express Tribune, November 21^st, 2012.