The industrial sector of Pakistan has appreciated the government's, especially the Ministry of Petroleum, for reduced annual maintenance (ATA) period of one of Pakistan's largest gas fields, Qadirpur, which was earlier decided to completely shut down from August 28 to September 17--a period of 20 days. But, due to special interest taken by the concerned government departments, the annual maintenance was completed within 7 days, which ensured supply of 415 mmscfd gas to the SNGPL network.
Sources in textile, fertiliser and CNG sectors, appreciating the government's initiative, said that this early supply of gas to the industrial sector of the country would earn billions of rupees of taxes and duties for the government and would also keep the wheel of economy moving, which would have stopped for several days if the government had not completed annual maintenance before time.
They said that despite the early resumption of gas from the Qadirpur gas field, urea shortage is still expected to reach record proportions of one million tons, largely for the incoming Rabi season starting in October.
This could have severe repercussions on the output of essential cash crops. The Ministry of Industries has pushed a summary to the Prime Minister asking to import urea, but so far there has been limited action by the subcommittee, headed by Finance Minister Hafeez Shaikh. Furthermore, the price of imported urea is Rs 3000 per bag while local urea currently sold by manufacturers is at Rs 1378 per bag, reflecting a saving of 54 percent to taxpayers and foreign exchange if the urea is produced locally. But due to gas shortage since April 2010, the fertiliser sector has been operational only 2 days a week in 2011 (till June 30, 2011) compared to other sectors which have been operational for 4 to 5 days a week.
A nightmare scenario is expected between October and December when farmers across the country would be looking for urea for the all important Rabi season and there would not be enough urea in the country as local production has been curtailed due to the government's 15-day shutdown per month of the fertiliser industry on the SNGPL network.
Farmers have been further burdened by the criminal act of many dealers who are hoarding urea and, adding another Rs 300 to 400 per bag, hiking the price to Rs 1700-1800 per bag. This price reflects the pressure on the agriculture sector where just 20 months back the price of a urea bag was Rs 850 prior to gas curtailment of fertiliser manufacturers.
Industry sources said that to further control the shortage and the plight of farmers, it is important that solutions are found quickly. Gas from the Qadirpur gas field has brought 415 mmscfd back into the system on September 5. If there would be further issues depleting supply on the SNGPL network, it would be critical to ensure supply to the urea manufacturers on a priority.
Full and immediate supply of gas to fertiliser sector will help in offsetting the urea shortage in the country. Moreover, as per the government's own 2005 gas policy, fertiliser sector has priority, after domestic consumers, to receive gas. Continued curtailment of gas to fertiliser manufacturers would increase the shortage of urea and increase the plight of agriculture sector - the backbone of the country's economy.
According to experts, from the economic point of view it is better for the country to supply gas to fertiliser sector as a priority to ensure local urea production. In a basic analysis, it is cheaper to import diesel and furnace oil which costs $18 and $22 per mmbtu (unit of energy) compared with imported urea which will cost taxpayers and the government $34 per mmbtu. To look at it in another way, it is cheaper for the country to save money on imported urea and import diesel and furnace oil for industry. Textile and other industries could use alternative fuels, such as diesel and furnace oil, but for fertiliser plants gas has no substitute, as they use gas to make ammonia for the production of urea.
Industry sources further said that it is critical in the interests of the country to support agriculture sector. It also makes economic sense as per the government's own 2005 gas allocation policy is to provide gas on priority to the fertiliser sector and help farmers from the economic plight they face which affects the total economy as a whole. Otherwise expect less agriculture output from the coming Rabi season.
They said that the country's industries are already badly hit by the shortages of gas and electricity, and agriculture sector is backbone of the economy. "Thus if we don't anticipate the consequences of this situation and take immediate steps to overcome this crisis situation, we may find ourselves in a larger crisis than country is facing right now."
Pakistan has the capacity to produce around 6.9 million tonnes of urea per annum but it is the government's decision to cut gas supply to fertiliser manufacturing plants that has led to this crisis situation. Now, it's government's responsibility to take alternative measures and import urea to meet the growing domestic requirements, else the agriculture sector of Pakistan would also face a fate like that of industrial sector of the country. According to an analyst, urea manufacturing plants are running at a very low output due to unavailability of gas and this situation may worsen while these plants would remain completely shut on account of three-month winter outage (January 1 to March 31).