Price of gas to Fatima, Agritech: Ministry seeks ECC’s approval for upward revision

ISLAMABAD: The Ministry of Energy has sought the approval of the Economic Coordination Committee (ECC) of the Cabinet to revise upward the price of indigenous gas supply to Fatima Fertilizer and Agritech to Rs1,238.68/MMBtu following the Determination of the Estimated Revenue Requirement (DERR) by the OGRA for the fiscal year 2023-24.

Sources in the Finance Ministry said that the Ministry of Energy in a summary stated that the ECC in March 2023 directed the Petroleum Division to provide indigenous gas to Fatima Fertilizer (Sheikhupura) and Agritech (Mianwali) plants on the SNGPL System up to 31 May 2023 and that there will be no subsidy involved in the supply of gas.

Accordingly, the rate of Rs1,050/MMBtu was communicated to the SNGPL by the Petroleum Division for the said supply of gas to both plants.

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Subsequently, the ECC of the cabinet approved that SNGPL-based plants, Fatima Fertilizer (Sheikhupura) and Agritech (Mianwali) shall be allowed to operate beyond 31st May 2023 till 31August 2023.

Both of these plants are being supplied gas as per the ECC’s decisions, however, no formal agreement has been executed between the SNGPL and said fertilizer plants due to a difference of opinion on the applicable rate of gas. As per the SNGPL’s stance, the rate of Rs1050/MMBtu is provisional. On 8th August 2023, the ECC while considering a summary submitted by the Ministry of Industries Production on the subject matter approved the extension in the supply of gas to both fertilizer plants up to 15th October 2023 on OGRA’s notified rates.

And during the ECC meeting, the secretary Petroleum Division appraised the forum that since OGRA has issued DERR for the financial year 2023-24 on 2nd June 2023 and according to the DERR for fiscal year 2023-24, the average prescribed price of SNGPL is Rs1,238.68/MMBtu.

Therefore, July 2023 onward, the rate of Rs1050/MMBtu would need to be revised based on the DERR by OGRA for fiscal year 2023-24. However, the decision has not been recorded accordingly. The current OGRA’s notified price for fertiliser sector on Sui’s network is Rs510/MMBtu and Rs1,500/MMBtu for fertilizer feed-stock and fuel-stock respectively.

The charging of the current OGRA’s notified rate from both fertilizer plants on SNGPL’s network would practically result in a subsidy. SNGPL is already claiming that it has to provide around 30 MMCFD RLNG at lower rates to one of these fertilizer plants which is leading to financial instability of the company.

The Petroleum Division proposed that the ECC’s decision dated 8th August 2023 may be revised as under “the indigenous gas supply to both SNGPLs based fertilizer plants i.e. Fatima Fertilizer (Sheikhupura) and Agritech (Mianwali) may be extended till 15th October 2023 at prescribed price determined by OGRA for SNGPL in DERR for the current financial year from July 2023 onward.

Accordingly, OGRA may notify Rs1050/MMBtu from March-June 2023 and Rs1239/MMBtu from July 2023 onward for Fatima Fertilizer (Sheikhupura) and Agritech (Mianwali) plants.

Copyright Business Recorder, 2024