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Monday May 20, 2024

Govt, fertiliser makers strike deal to regulate urea prices, ensure Mari gas supply

By Our Correspondent
May 16, 2024
A labourer hands over a fertiliser bag to another labour. — AFP/File
A labourer hands over a fertiliser bag to another labour. — AFP/File

ISLAMABAD: The government and fertiliser manufacturers reached an agreement to supply cheap gas from the Mari Gas Field at a unified price on a long-term basis, paving the way for state regulation of urea prices, officials said Wednesday.

Under an initial understanding, the government will ensure a stable gas supply to fertilizer plants, while regulating market prices to protect farmers, a Ministry of Industries and Production official told The News.

The Ministry of Industries and Production intends to present a summary before the Economic Coordination Committee (ECC) of the Cabinet for approval. This summary will propose a viable solution and detail the provision of feed gas to the industry at a unified price.

Previously, fertilizer prices had been determined by manufacturers. However, with the government's decision to permit Mari gas supplies at a unified price for all plants, a shift is expected towards government regulation of urea and other fertilizer prices akin to petroleum products.

Last month, manufacturers had unilaterally increased urea prices by Rs550 per bag, prompting government intervention. Despite several meetings, the government initially failed to pressure manufacturers into reversing their decision.

The demand for a unified gas supply from the Mari Gas Field has been long-standing among fertilizer manufacturers. A similar proposal was put forth in 2022 but was not entertained. On May 14, the Fertilizer Manufacturers of Pakistan Advisory Council advocated for this proposal in a letter to the government.

They had proposed, “All the fertilizer plants should be formally allocated and supplied gas including for future expansions and debottlenecking exclusively from Mari Gas Field under bilateral arrangements in accordance with applicable gas pricing policies.”

The Ministry of Industries and Production has now decided to present this summary to the ECC for approval. The government will allow feed gas supplies at a unified price on the condition that it will regulate fertilizer prices.

Meanwhile, Jahangir Paracha, Managing Director and CEO of Fauji Fertilizer Company, met with Federal Minister for Industries and Production Rana Tanveer Hussain on Wednesday. Secretary of Industries and Production Waseem Ajmal Chaudary also attended the meeting.

Paracha informed the minister that the Fertilizer Manufacturers of Pakistan Advisory Council has unanimouslyagreed to reduce the price of urea fertilizer in the country. This move aims to benefit farmers and ensure affordable agricultural inputs. He proposed that all fertilizer plants should be allocated and supplied gas exclusively from Mari Gas Field under bilateral arrangements, in line with applicable gas pricing policies.

The council's proposal suggests that the government should ensure an uninterrupted gas supply to the fertilizer industry from the Mari Gas Field for the next 10 years. Paracha emphasized that this would secure affordable urea for farmers and save foreign exchange on urea imports. If accepted, the fertilizer industry would not require future subsidies, potentially attracting further investment in production capacity and energy efficiency.