ISLAMABAD: The Economic Coordination Committee (ECC) of the cabinet has constituted an inter-ministerial committee headed by Secretary Industries and Production to examine possibility of supply of RLNG to Fatimafert and Agritech Fertilizer plants vis-à-vis import of urea to cater the requirement of urea in the country beyond December, 2022.
The decision was taken on a summary of Petroleum Division in which it was suggested that RLNG be supplied to both fertilizer plants at concessional rates from October to December 2022 to ensure urea production locally as TCP tender for import of 0.3 million tons of urea was scrapped.
Petroleum Division informed the forum that considering the requirement of urea in the country, Ministry of Industries and Production in year 2018, with the approval of ECC, had decided to provide subsidized RLNG to M/s Fatimafert Limited and Agritech Limited. The tariff differential was picked up by the Government as a budgeted subsidy. The government has provided subsidy of Rs 70.457 billion on supply of RLNG to both fertilizer plants at concessional rates. Of Rs 70,457 billion subsidy, Rs 1.364 billion was extended in 2018, Rs 14.563 billion in 2019, Rs 3.162 billion in 2021 and Rs 33.703 billion till September 2022.
Petroleum Division further informed that the period for operation of both plants on subsidized RLNG has been extended from time to time with the approval of the ECC of the Cabinet depending on the review of the urea stocks in the country by the Ministry of Industries and Production.
Urea fertilizer plants: Ministry reluctant to supply LNG
It was stated that the proposal for shifting of both fertilizer plants on indigenous gas was under active consideration of the Petroleum Division and would be placed before Cabinet Committee on Energy (CCoE) as soon as the consultation with the relevant stakeholders on the summary for CCoE was completed and the proposals were finalized.
It was highlighted that ECC approved subsidized RLNG price of Rs. 839/mmbtu and the Government during the last financial year picked up a subsidy of Rs.33 billion. For the CFY, Government has budgeted Rs. 15 billion in the demand of Ministry of Industries and Production for supply of subsidized RLNG to both the above stated plants, which was insufficient against pending claims for the period June-22 to October-22, amounting to Rs. 24 billion whereas claim for the month of November, 2022 was estimated to be Rs.5.2 billion.
It was further highlighted that on account of subsidy incidence for both the urea plants, the urea price, as per the latest tender for import of 300,000 MT received by Ministry of Industries & Production was at $ 520 per MT (Rs. 5,980 per 50kg bag) whereas local urea selling price in the country is $187 per MT (Rs. 2,150 per 50 kg bag).
The combined urea production capacity of both plants was 70,000 MT per month; therefore, the estimated impact on forex for importing 70,000 MT per month of urea equivalent to production of both plants at current international price was estimated at 36 million dollars per month, besides providing a subsidy of around Rs. 6.20 billion per month for supply of imported urea to farmers.
Petroleum Division submitted following proposals for consideration and approval of the ECC: (i) operations of the Fatimafert and Agritech fertilizer plants on subsidized RLNG may be extended for another period of six months, i.e., October, 2022 to March,2023; (ii) since the budgeted subsidy of Rs. 15 billion for supply of subsidized RLNG to Fatimafert and Agritech plants is insufficient to clear for the subsidy claim of Rs. 24 billion until October, 2022; therefore, additional amount of Rs. 9 billion may be provided as a supplementary grant in the demand of Ministry of Industries and Production to clear the backlog until October, 2022; (iii) the continuation of the operations of the above two plants would be subject to review of urea stocks position in the country by the Ministry of Industries & Production along with Ministry of Food Security & Research on monthly basis during six months extension period; (iv) Finance Division may earmark an estimated subsidy of Rs.31 billion for operation of these fertilizer plant for a period of six months, i.e., October 22-to March 23. However, release of subsidy on monthly basis would be subject to the recommendations by the Ministry of Industries & Production along with Ministry of Food Security & Research; and (v) in order to save forex and incidence of subsidy at provision of RLNG to both the plants, Petroleum Division to finalize the proposals for shifting of fertilizer plants on indigenous gas supply by end of March, 2023 or earlier.
Finance Division observed that it was an important issue and required comprehensive discussion and to deeply look into the issues as impact of the subsidy, forex pressure etc. The forum discussed the matter in detail and recommended to expedite import from China which was willing to provide 3.00 million tons of urea to Pakistan on G2G basis. It was added; however, that only 40% of the quantity would be reached by December 2022, which would be insufficient to cater to the requirement of urea during current Rabi season in the country. It was further urged that supply of RLNG to Fatimafert and Agritech Fertilizer Plants was essential during November - December 2022 to meet the requirement of urea in the country. Secretary Petroleum Division stated that due to the increase demand of gas for domestic sector during current winter season, it would be difficult to supply RLNG to these plants and therefore, options of import of urea may be explored.
The ECC also observed that international price of urea was quite high and in case the entire requirement of urea was to be met through import, then it would cause substantial burden on the foreign exchange reserves. It was suggested that the concerned Ministries/ Divisions should engage at the Secretary’s level, to examine possibility of supply of RLNG to Fatimafert and Agritech Fertilizer plants vis-à-vis import of urea to cater to the requirement of urea in the country beyond December, 2022. The ECC agreed to the proposal.
While agreeing to extend operations of both fertilizer plants till December 31, 2022 on RLNG, the ECC constituted a committee under the chairmanship of secretary Ministry of Industries & Production comprising, Secretary, Petroleum Division; Secretary, Commerce Division; Secretary, Ministry of National Food security & Research and Secretary Finance to examine possibility of supply of RLNG to Fatimafert and Agritech Fertilizer plants vis-à-vis import of urea to cater to the requirement of urea in the country beyond December, 2022.
Copyright Business Recorder, 2022
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