Two local fertilizer plants which have been supplied a blend of local gas and RLNG for two months on SNGPL system to meet Rabi urea demand, have reportedly expressed unwillingness to operate the plants at current rates of gas. According to a letter written by M/s Agritech, one of the fertilizer companies which is being supplied a blend of gas and RLNG, has conveyed its concerns to the Secretary Finance. The other fertilizer plant is Fatimafert which is located at SNGPL system.
The company says that ECC in its decision on September 10 2018 approved supply of blend gas (62pc system and 38pc RLNG) for 60 days for two urea plants on SNGPL. Gas price at this blend ratio was Rs 858/- MMBTU, higher than gas rate of Rs 729/-MMBTU agreed with MOI&P in a meeting held on September 7, 2018 at Ministry of Finance.
Despite high gas price, both companies started plants as goodwill gesture to GoP to address urea shortages in the country. It was discussed with MOI&P that necessary amendment will be sought to ensure agreed gas price of Rs 729/-MMBTU with adjustment of blend ration for 60 days of plant operation.
However, despite passing of more than a month, the intimation has not yet been provided to SNGPL. Effective price on 62 percent system & 38 percent RLNG has further increased from Rs 858/- MMBTU to Rs 941/-MMBTU due to recent increase in system gas price, RLNG price and currency devaluation.
"We are finding it extremely difficult to operate plant at the revised gas rate of Rs 941/- MMTBU and request to expedite revision of blend gas to achieve agreed gas rate of Rs 729/- MMBTU," the company added. Moreover, provision of blend gas should be ensured for a period of 60 days from the plant operations (September 26 to November 26, 2018 in case of Agritech) in line with ECC decision.
ECC also approved RLNG supply with subsidy provision after completion of 60 days on blend gas however the ECC decision translates into RLNG price of Rs 1058/- MMBTU, making it economically unviable to operate urea plant. Agritech has requested that a fixed RLNG rate of Rs 729/- MMBTU may be ensured for continuous urea production during Rabi 18/19. Subsidy of approx Rs 811/- MMBTU at present RLNG price of Rs 1540/- MMBTU is paid directly to SNGPL for smooth gas supply and plant operations.
According to the fertilizer plant, the subsidy of Rs 811/- MMBTU translates into Rs 1217 per bag of urea which is lower than subsidy of Rs 1330/bag to be incurred on imported urea by GoP. In recent tender of TCP for import of 100,000 tons, TCP received offer of $ 346.11 per ton CFR Karachi. Landed cost of the imported urea including all incidentals will cost approx. Rs 2920/bag and GoP will have to incur subsidy of around Rs 1330/bag on imported urea which clearly indicates that GoP will incur approx. Rs 113/bag lower subsidy if the plants are operated at subsidized RLNG price of Rs 729/-MMBTU relative to imports, besides saving employment of thousands, raising additional taxes, and improved large scale manufacturing in the country. The company requested that all pending matters pertaining to plants on SNGPL network may be resolved on priority enabling these plants to operate on continuous basis.
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