Urea import to cost Rs452 billion, claim manufacturers

Industry says it has sufficient capacity, can even export fertiliser.

LAHORE: The country would have to spend about Rs452 billion on urea import annually if the government decides to permanently stop vital gas supply to seven fertiliser plants with annual production capacity of 6.9 million tons – sufficient to meet all domestic demand, say fertiliser manufacturers.

The import of six million tons of urea would cost around Rs312 billion and if the government subsidised this urea, as is the practice, it would need an additional Rs140 billion to match the prevailing urea prices, said Shahab Khawaja, Executive Director of Fertilizer Manufacturers Pakistan Advisory Council.

“Our current economic condition doesn’t allow us to spend such a huge amount on urea import while the country is self-sufficient in urea production and we can even export our additional production,” he said in a statement.

According to Khawaja, out of the country’s 4.3 billion cubic feet per day of gas production, the fertiliser industry was allocated 818 mmcfd but it hardly got 600 mmcfd through Mari and Sui Southern Gas Company (SSGC) networks. All four fertiliser plants connected to Sui Northern Gas Pipelines Limited (SNGPL) and with gas allocation of 240 mmcfd remained shut for over 300 days in 2012.



Gas supply not only fed the fertiliser plants but it also benefitted the agricultural sector, which has a 21.4% share in gross domestic product and ensures food security for 185 million people of the country, Khawaja said.

“If we permanently shut down our plants, not only more than $10 billion worth of investment in the fertiliser sector will be lost, the national exchequer will also lose Rs28 billion of taxes annually as the industry has paid over Rs140 billion as taxes in the last five years,” he said.

“Fertiliser plants are also listed on the stock exchanges with market capitalisation worth billions of dollars, their closure will result in loss of investor confidence, bank defaults and will affect government’s privatisation programme.”

In 2012, average urea price was Rs1,015 per bag. The government provided feed/fuel differential through concessionary feed gas at Rs250 per bag and remaining Rs765 was passed on to farmers by the industry.

Khawaja pointed out that fertiliser consumption in the country, which had touched 6.5 million tons in 2009, dropped to 5.3 million tons in 2012. He linked the lower demand to higher urea prices after imposition of general sales tax, gas infrastructure development cess and over 88% gas curtailment for SNGPL-based four fertiliser plants with production capacity of 2.3 million tons.

He asked the government to curtail gas losses to bring the energy crisis under control without reducing supplies to any sector.

Published in The Express Tribune, July 24^th, 2013.

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