Government saves $250 million with resumption of gas supply to two fertiliser plants

The government's decision to resume gas supply to two closed fertiliser plants resulted in saving of precious foreign exchange amounted to approximately $250 million, besides sufficient urea supply in the domestic market during last year.

Industry sources told Business Recorder on Thursday, that Pakistan has an installed production capacity of some 6.8 million tonnes urea annually, however, in the past fertiliser plants were unable to produce the sufficient commodity due to gas curtailment and government was compelled to spend millions of dollar of precious foreign exchange to import urea for domestic consumption. In addition, government also paid billions of rupees of subsidy on imported urea to keep the prices lower.

In September 2018, with concrete efforts of Abdul Razak Dawood, Advisor to Prime Minister, gas supply was resumed to two closed fertilizer plants i.e. Agritech and Fatima Fertiliser. With restoration of gas supply these two plants have successfully produce some one million tonnes of urea for local consumption during the last year. The government's decision also eliminated the need of urea import and saved the national kitty's precious foreign exchange.

Urea sales witnessed a phenomenal jump of 84 percent (YoY) to the highest monthly urea offtake of 1.307 million tonnes during December 2019. On a yearly basis, urea offtake clocked in at 6.2 million tonnes during 2019 that is 2nd highest yearly offtake after 2009. After record offtake in December 2019, urea stock has fell down to 0.2-0.25 million tonnes.

Industry sources said that the increase in urea offtake was because of tonne increase in wheat support price by the federal government and higher wheat market prices giving favourable economic outlook of major Rabi crop.

Pakistan's domestic demand of 6.2 million tonnes urea during 2019 was also comfortably met by local producers owing to prudent and timely government policies particularly gas supply to closed plants.

Despite massive and higher offtake in December, constant urea supply was possible due to continuous running of urea plants especially closed plants on SNGPL, Agritech and Fatima Fertiliser.

These two plants got gas from September 2018 to November 2019 and contributed some 0.8 million tonnes urea in 2019 and without their production a shortage of urea was inevitable. The federal government's decision has successfully saved foreign exchange amounted to $250 million as timely gas supply has avoided import of urea, they informed.

Advisor to Prime Minister Abdul Razak Dawood pursued these plants operations which also resulted in fertiliser being one of only sector showed 15 percent growth in Large Scale Manufacturing sector.

Industry sources said that massive urea offtake will set the foundation for the growth of Pakistan's agricultural sector ensuring not just its own food security but also paving the way for Pakistan to become a food basket for countries in the region. The growth in urea sales also indicates the trust of the farmers in the sector and the government, they added.

Fertiliser Manufacturers of Pakistan Advisory Council (FMPAC) and National Fertiliser Development Centre (NFDC) estimated urea demand of 6.2 to 6.3 million tonnes during 2020 with likely shortage of around 0.6 million tonnes, if gas supply to two plants will not be restored.

Industry sources said that two closed plants Agritech and Fatima Fertiliser, having combined capacity of 1 million tonne, can produce some 0.8 million to meet the estimated urea shortages in 2020 saving precious Foreign exchange of around $225 to $250 million.