Urea crisis: Government plans to operationalise 3 closed fertilizer plants

ISLAMABAD: The government is going to operationalise the already closed three fertilizers plants in Punjab for two months aimed at averting the possible crisis of urea and its price hike, as farmers have started feeling the pinch that could cripple the agriculture growth, The News has reliably learnt Tuesday.

Due to urea shortage, in the open market its prices have started increasing and in last one month its price has jumped up by around Rs100/bag and is now being sold in some areas as much high as Rs1720/bag. While, at start of Kharif cropping season in April 2018, urea price was around Rs1400/bag. In Pakistan, Kharif crops which are also called monsoon crops are sugarcane, cotton, maize and rice.

If the situation persists, then it would not only affect the summer crops (Kharif) production, but could also a risk to the upcoming Rabi (winter crops) that starts in October and its main crops are wheat, gram, lentil, potatoes, onions and tomatoes, agriculture experts feared.

On Tuesday, top officials of four federal ministries including Ministry of industries, Ministry of Finance, Ministry of Food security and Ministry of Petroleum held a meeting to find a way out and it was decided to move a summary to the Economic Coordination Committee (ECC) of the Cabinet and seek the permission for operationalising the closed fertilizer plants and provide them natural gas with subsidised rates. Instead of imports, operationalising the existing units would be an economically viable option, a government senior official said.

A summary has been moved to the ECC on Tuesday which would take it up on today (Wednesday), if approved the gas supply would be started to these plants to produce this vital agriculture input. The subsidy has been worked out at around Rs3 billion which would be paid to the Sui Southern Gas Company Limited (SNGPL) for supplying subsidised gas.

The plants which have been identified to be re-operationalised include Dawood Hercules, Pakarab fertilizers Limited and Agritech (formerly Pak-American Fertilizers Limited). These ministries have worked out a plan to supply 28 percent domestic gas and 72 percent Re-Gasified Liquefied Natural Gas (RLNG) to these plants. With the inclusion of the RLNG, the gas tariff has been worked out at Rs1234 per million British thermal units (mmbtu) however, the government would provide Rs634/mmptu as subsidy to SNGPL and the utility would charge only Rs600/units from these plants. In this summary, this proposal has been included now the ECC would decide it.

Dawood Hercules has gas demand of 42 million cubic feet/day (mmcfd) and its urea production capacity is 2200 tons/day. Pakarab fertilizers Limited has gas demand of 45 mmcfd and its fertilizer production capacity is 2800 tons/day, of which the share of urea is 300 tons, Calcium Ammonium Nitrate (CAN) 1500 tons and Nitro Phosphate Fertilizer of 1000 tons a day. Agritech’s gas requirement is 28.5 mmcfd and can produce urea of 1200 to 1300 tons/day.

These fertilizers plants remained close due to shortage of natural gas or because high gas prices. They have laid-off hundreds of its employees and some of them are working on half salaries, sources said. Industry sources told this scribe that since the LNG is attached with the crude oil prices and the dollar has appreciated against rupee, so it is not viable for us to operate our plants on LNG as its price is high. If the government approves this proposal of Rs600/mmbtu gas supply to us, then we can run our plants.

The previous government in May 2017 had allowed doubling of export of urea to 0.6 million tons and also extended the deadline from 28 April, 2017 to 31 October, 2017. But, now the country is facing its shortage and prices are going up and up.

Reportedly, in August 2018, urea stock has hit the lowest level in summer 2018, and recorded at 0.087 million tons which is 12 pc less than monthly demand. With the local production of 460,000 tons, the total urea availability in August comes in at 547,000 tons against the off-take of 620,000 tons, showing a shortfall of 73,000 tons.