Heads of fertilizer companies have appreciated Sui Northern Gas Pipeline's (SNGPL's) efforts for reduced annual maintenance (ATA) period of one of Pakistan's largest gas fields, Qadirpur, which ensured a supply of 415 mmscfd gas to SNGPL network from September 5 against the scheduled gas resumption date of September 17.
However, in a meeting with SNGPL Managing Director, they expressed their reservations about curtailment of gas to fertiliser producers, which could further hamper the efforts to produce the required quantity of fertiliser for domestic consumption in fast-nearing Rabi season, well informed sources told Business Recorder here on Saturday.
Fertiliser companies briefed the SNGPL MD about fertiliser shortages due to the increased curtailment of gas for fertiliser plants which, according to the ECC's decision, should not be more than 20 percent, but the curtailment for fertiliser sector remained around 55 percent during the year 2011.
Sources said that SNGPL was of the view that the government of Pakistan was well aware of the validity of the economic argument that gas needs to be supplied to the fertiliser sector on priority basis, after the domestic consumers, and also from an agriculture point of view it is vital for the agriculture economy of the country that produces food for the 180 million population as well as generates massive employment opportunities.
Sources said that currently the fertiliser sector is getting 175 mmscfd gas from their allocated 240 mmscfd, which is well below 80 percent of what the ECC decided about gas allocation to the fertiliser sector. They said that it is a major reason of possible urea shortage of over 1 million tons in the upcoming Rabi season in which most important wheat crop is sown in the country.
Sources said that Sindh has already been badly hit by the torrential rains that have damaged ready crops on millions of acres across Sindh, which could lead to shortage of essential commodities and price escalation.
They said that SNGPL has also informed the fertiliser companies that they may have to face complete closure of their plants during winter for up to 60 days, as opposed to 45 days of last year. This shutdown of urea plants for 2 months would badly hit the agriculture sector as it would further aggravate urea shortage in the country and government would have to spend billions of rupees on urea import and then billions of rupees on giving the subsidy to keep the imported urea's prices at the domestic level.
Fertiliser dealers are also taking full advantage of the demand and supply gap and are still hoarding urea, earning up to Rs 350-400 per bag. A bag of urea, which should be available to farmers at Rs 1300 to 1400, is being sold at Rs 1800 to 2000, which is a heavy burden on the pockets of poorer and small farmers which are in majority in the country.
Sources said that it is better for the country to supply gas to the fertiliser sector as priority to ensure local urea production. They said that it is cheaper to import diesel and furnace oil, which cost $18 and $22 per mmbtu (unit of energy) compared with imported urea which would cost taxpayers and the government $34 per mmbtu. It would be cheaper for the country to save money on imported urea and import diesel and furnace oil for industry. Especially, textile and other industries can use alternative fuels such as diesel and furnace but gas for fertiliser plants has no substitute, as they use the gas to make ammonia for production of urea.
Due to gas curtailment to fertiliser sector the manufacturer price stands at Rs 1378 including GDP and farmer price is Rs 1398 but due to the shortage dealers are hoarding and raising prices and a urea bag is being sold around Rs 1800 to 2000 per bag. This rise in urea bag price is equal to the rise in its prices over the last 32 years. The government has informed the fertiliser sector that gas supply to their manufacturing plants would now remain as low as 15 days a month, which would further raise the price of a urea bag by about Rs 400.
According to sources, fertiliser industry is facing worst treatment by Sui Northern Gas Pipelines (SNGPL), as fertiliser manufacturing units are getting only three days a week supply of gas as compared to four days for other industry including textile and five day for CNG sector during first half of 2011.