KARACHI: Engro Corporation has filed a contempt of court application against Sui Northern Gas Pipelines Limited (SNGPL) for cutting gas supply to its new fertiliser plant, the company said on Thursday.
Gas supply to the plant, located in Dharki, was stopped on the night of May 17. Engro said that Sindh High Court had barred SNGPL from blocking supply.
Engro’s flagship fertiliser plant has been facing gas cuts since its inauguration in January 2011.
SNGPL faces the dilemma of meeting rising demand from domestic and industrial consumers at a time when production remains stagnant.
Every time gas supply is cut, fertiliser companies raise the price of urea. That has mainly helped the companies to offset the affect of falling production.
But industry officials say that price of fertiliser can be raised to a certain extent beyond which local product will begin to lose competitive edge over imports.
Engro has invested $1.1 billion in the plant, which has capacity to produce 1.3 million tons of urea a year. As per contractual obligation, the government must give Engro 100 MMCFD. But the company had been getting just 80 MMCFD until May 17.
The total borrowing of Engro Fertiliser is around Rs70 billion, which includes loans from international financial institutions and banks for capital investment. It has to make principal and interest repayments of Rs15 billion in 2011.