ECC decides to shift fertilizer, Agritech plants to gas

ISLAMABAD: The Economic Coordination Committee (ECC) of the Cabinet has decided to shift fertilizer and Agritech plants to indigenous gas as they wanted a revision of variable contribution margin (VCM) of Rs186 per bag and capping of general sales tax (GST).

Sources said that the Ministry of Finance supported the proposal of the Ministry of Industries and Production and contended that the shifting of these plants from the RLNG to indigenous gas would help curtail the cost of the gas subsidy.

The Ministry of Industries and Production stated that due to the recent increase in fuel prices and other factors, these plants have approached it for revision of the variable contribution margin (VCM) and capping of the GST at the price paid by the plants and not on the OGRA’s notified monthly tariff for RLNG.

The ministry further stated in the proposal that while considering its proposal, an earlier meeting of the ECC had approved operations of Fatima Fertilizer and Agritech on RLNG or switchover to indigenous gas whichever is available for a period of six months –April-September 2022 and the same was ratified by the Cabinet.

As per information provided by the Petroleum Division, these plants were not shifted to indigenous gas and their gas rate was also not finalized. These plants are in operation on the previous rate of Rs839 per MMBTU.

Both the SNGPL-based plants – Fatima Fertilizer (Sheikhupura plant) and Agritech – are operated by provisioning of the RLNG on a cost-sharing basis. The gas rate for operations of these plants is worked out on the basis of variable contribution margin (VCM) which was fixed at Rs186 per bag.

After the recent increase in fuel prices and other factors, both plants have approached the Ministry of Industries and Production for revision of the VCM and capping of GST at the price paid by the plants and not on the OGRA’s notified monthly tariff for RLNG.

The ministry proposed that; (i) Petroleum Division may be directed to ensure compliance with the earlier decision by the ECC and the Cabinet i.e. shifting of subject plants to indigenous gas, which will result in saving of funds utilized on provisioning of RLNG and would also result in continuous operations of both these plants; (ii) an inter-ministerial committee comprising of Industries and Production (chair), Petroleum, Finance and National Food Security may be constituted to work out the gas price/VCM and price at which GST is to be charged (the committee may co-opt representatives from Agritech and Fatima, Sheikhupura plant during its deliberations).

As suggested by the Finance Division, the FBR may also be included in the committee for capping GST.

The Ministry of National Food Security and Research has supported the proposal, whereas, the Petroleum Division has informed that proposals for supplying indigenous gas to these plants subject to gas availability and price rationalization are under consideration and the sustainable proposals will be placed before the ECC in due course of time.

The Finance Division has endorsed the proposal as switch over of gas to these plants from RLNG to the indigenous gas will help curtail the cost of the gas subsidy.

Copyright Business Recorder, 2022