The fertilizer sector Thursday held a meeting with Prime Minister's Advisor on Commerce, Textile, Industries and Production Razzak Dawood and discussed issues raised in the recent meeting of the ECC. One of the participants told Business Recorder that the supply-demand situation was discussed at length. It was concluded that by end of January 2019, the country must have 200,000 tons in stock therefore the three plants must be operationalised.
Three fertilizer plants, ie, Fatimafert, Agritech and Pak Arab are not operational for the last one year. Pak Arab produces a mix of fertilizers and its urea production capacity is about 8500 tons per month. Fatimafert and Agritech are exclusively urea plants with production capacity of 44,000 tons and 35,000 tons per month respectively. Installed capacity of all 19 fertilizer plants in the country is 6.23 million tons per annum while the annual consumption, on average, comes to 5.9 million tons. The shortfall has occurred due to the export of 635,000 tons of urea last year after approval by the ECC and shut down of three plants for want of system gas for the last year. By operating three plants for four months, September to December, 2018, an additional 348,000 tons can be achieved. The net Variable Contribution Margin has been worked out in consultation with fertilizer industry and comes to Rs 606 per bag.
The meeting also discussed options for provision of RLNG or mixed gas. Price of gas will be finalised by the concerned parties at a meeting with Finance Minister on Friday (today).
The Ministry of Industries and Production maintained that the option of operationalising the three plants seems viable and was recommended for approval. As regards the total subsidy impact, it was worked out based on the variable contribution margin which comes to Rs 3.20 billion. In the ensuing discussion, it was observed that it might be a more sustainable proposition to operationalise three plants through exclusive provision of RNLG rather than a gas mix.
The perception of making windfall profits through exports and price hike were thoroughly discussed and this impression was apparently dispelled.
The ECC directed the Ministry of Industries and Production to work out the windfall gains reaped by the fertilizer industry, in the light of the net Variable Contribution Margins, as a result of charging higher prices as well as through exports during 2017-18 and 2018-19. The windfall gains may be adjusted against the subsidy outstanding in favour of fertilizer industry schemes which were in vogue during the preceding three financial years.
Fertilizer industry also highlighted the impact of envisaged gas price revision on Urea prices: Rs 79 per bag in case of 26 percent and Rs 97 in case of 30 percent hike.
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