Industry ministry seeks subsidised gas for urea plants

LAHORE: Given the shortfall of natural gas and high RLNG prices, industry ministry has called on its energy counterpart to ensure supply of highly subsidised gas to fertiliser plants as feedstock in peak winter season.

The demand to this effect was raised by Makhdum Khusro Bakhtyar, Federal Minister for Industries and Production in a consultative meeting on Wednesday. Bakhtyar directed the officials of Petroleum Division, Ministry of Energy, to ensure the supply of RLNG/gas to fertiliser plants in order to meet the target of local urea production during Rabi 2021-22.

He said that such intervention would ensure the timely availability of fertiliser to farmers and enhance the agricultural output to meet the requirement of food crops in the country. The minister also noted that domestic production of urea would slash its imports, reducing the import bill and improving balance of payments position.

Moreover, it would also ensure availability of fertiliser for farmers at affordable prices, the minister said.

The consultative meeting was held in the wake of the government plans to fulfill the demand of urea during the coming rabi sowing season.

The session was attended by representatives of the fertiliser industry, senior officials of the Petroleum Division, Finance Division, and the Ministry of National Food Security & Research. The minister was told that the projected requirement of urea was estimated around 3.2 million tons for rabi season 2021-22. However, urea demand would be met by domestic production, officials apprised the Minister.

Furthermore, it is learnt the government is in a catch-22 situation, wherein it has to choose between importing urea at very high prices or manufacture it locally by diverting exorbitantly high imported RLNG. A senior member of Fertiliser Manufacturers of Pakistan advisory Council (FMPAC) told The News that urea price in the international market was hovering around an unprecedented level of Rs5000/50kg bag.

On the other hand, spot rates of LNG were already touching historic highs of $20/MMBtu. And due to capacity constraints and its high demand, RLNG is not available in abundance. Hence, he observed, imports as well as local production seemed to be an extremely uphill task for the policymakers. It is worth mentioning that the federal ministry of finance in a recent meeting already noted that a substantial amount was being spent on the provision of highly subsidised natural gas to fertiliser plants.

“The present government is providing gas/RLNG at concessional rates to the fertilizer plants for sustainable production during these testing times," said Finance Minister Shaukat Tarin in the last week of August, 2021.

He further said the Covid-19 pandemic had delivered a supply shock to the global commodity markets and pushed up the prices of agricultural inputs substantially. Meanwhile, industry sources also stressed the need to scrutinise quota of subsidised gas to fertiliser manufacturing units.

There should be a strict criterion for supply of RLNG at concessional rates to inefficient urea plants, they observed. “Isn't it an unwise decision to continue supplying highly subsidised gas to inefficient plants,” they posed.