In 2011, out of the four plants operating on the Sui Northern Gas Pipelines network, Pak-Arab Fertilisers Limited received a total of 8,278 million cubic feet (mmcf), Dawood Hercules 6,513 mmcf, Agritech 3,142 mmcf and Engro 12,643 mmcf. In 2012, according to an agreement with Sui Northern, the fertiliser plants were to receive gas on 15 days rotation — however, as the situation worsened even this agreement was not followed. In 2012, the total gas received so far (for the January-November period); Engro 6,490 mmcf, Pak-Arab 4,941 mmcf, Dawood Hercules 2,788 mmcf and Agri-tech 2,655 mmcf. During the second half of 2012 gas supply to plants was as follows; Agritech 30 days, Pak-Arab 30 days and Dawood Hercules 15 days.
Pak-Arab Fertilisers Limited, Agritech and Dawood Hercules have suffered huge losses owing to gas curtailments during the current year. Being solely dependent on the SNGPL network for its feedstock gas, Pak-Arab alone has not produced for over 250 days out of a total of 325 days of 2012. Engro Fertilisers Limited, a subsidiary of Engro Corporation, has the advantage of two independent sources for its gas supply. Hence it was able to post reasonable profits in 2011, i.e., Rs4.5 billion. In 2012, Engro’s one plant continues uninterrupted operations while others, dependent on the SNGPL, are likely to report losses. Another important fact to note is that among the plants operating on the SNGPL network, Engro is the single largest consumer and requires 100 mmcfd, which is almost as much as the cumulative requirement of the other three (which is 135 mmcfd).
It is important to note that none of the fertiliser plants were operating for the promised period as laid down in the agreement with SNGPL. Being an agriculture-based economy, the importance of fertilisers need cannot be overstated. The question arises that given the significance of the sector, why is it that the priority of the fertiliser sector which was at number two behind domestic users under the gas policy of 2005 has been now relegated to number four behind power and industry. The total number of people whose livelihood is dependent on these plants is over 10,000, and in addition thousands more connected to the business also have their incomes at stake.
The ongoing gas curtailment is taking a heavy toll on the agriculture sector and also on the economy as a whole. Increasing prices of urea as a consequence of this, levy of general sales tax and imposition of the infrastructure development cess have all led to a significant increase in input costs burdening the farmer and threatening food security since urea consumption continues to decline.
On the other side, the economy is forced to bear the cost of importing fertilisers when the local capacity is lying idle. During 2011 and till June 2012, the government has imported over 2.2 million tons of urea by spending almost Rs100 billion and another Rs75 billion was spent on providing a subsidy on the imported fertiliser. In the last five years, the fertiliser industry has invested over five billion dollars which is among the highest by any sector in the country. If such projects continue to suffer, future foreign investments may also be at risk.
Published in The Express Tribune, December 14th, 2012.
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Saqib - An informative article indeed. I think the key is the priority given to fertilizer sector. It would be good to see multiplier effect quantitative comparisons of economic productivity between alternative industries, which is to say that a unit of gas fed to one industry vs. other will create a net economic gain of this much amount. The issue is that energy availability is highly limited so rationing of the resource is expected, as long as it is economically justified.
On a side note, you might want to put your photograph in the next op-ed, that will increase readership (it seems to be part of ET culture that authors with photos attract more audience).