Urea production at all fertiliser plants on Sui Northern Gas Pipelines Limited (SNGPL) network has come to a halt following the gas supply suspension. Industry sources told Business Recorder Thursday that in an apparent move to provide gas to power sector on a priority basis, supply to all four fertiliser plants on SNGPL network has been suspended on a short notice Tuesday. After gas discontinuation all urea plants on SNGPL including DH Fertiliser, Pakarab, Engro and Agritech have been compelled to shut their production.
They said agriculture sector is entering into peak consumption time of Kharif 2013 and this closure will result in higher urea supply-demand gap across the country. For the past three years fertiliser sector has been worst-hit sector on SNGPL network in terms of gas supply; in 2012 the sector operated at a mere 12-13 percent of its installed capacity. During 2013, post winter shutdown of 4 months, fertiliser plants on SNGPL received average gas at 2 days a week with frequent sudden shutdowns and presently no fertiliser plant is getting gas in the peak season.
Due to this gas curtailment, despite having sufficient production capacity, the country is importing urea to meet its domestic needs. Urea imports in last 3 years remained 3.4 million tons with foreign exchange component of $1.5 billion, while over Rs 85 billion subsidies have also been paid on imported commodity. The SNGPL-based 4 plants have an installed capacity of 2.4 million tons annually and require 245 mmcfd gas. However, they were getting only 70-75 mmcfd gas since March 2013, they said.
“If gas remains suspended to the plants like in 2012, the government will be compelled to import more expensive urea with huge spending on subsidy to maintain its prices at low level,” they added. Fertiliser plants invested $2.3 billion in last 4 years making Pakistan self-sufficient in urea production and with consistent gas supply to these plants, the government can ensure timely availability of this key farm input to farmers at the cost effective rates.
Sufficient domestic production will also help government to reduce its fiscal deficits as well as subsidy spending. When the forex reserves are depleting gradually, Pakistan cannot afford to spend hundreds of millions of dollars on urea import. Industry sources said all other industries have alternative fuel options except fertiliser sector that uses gas as raw material to produce urea for farmers, which not only ensures food security of the masses but also provides raw material to industries such as textile and food processing. They estimated import of one million tons of urea which can cost the exchequer about $450 million and a subsidy of Rs 21 billion to match the imported urea price to domestic urea prices, if gas remained discontinued to fertiliser plants in 2013. The fertiliser sector hopes that the PML-N government would ensure judicious distribution of gas amongst all the sectors of economy.