The ill-conceived gas load management plan of the government not only forced local fertilizer manufacturing plants to shut down for over six months last year but also badly affected agriculture sector, the backbone of the economy. This was stated by CEO Dawood Hercules Fertilisers Ltd (DHFL) Rasheed Lone and Agritech CEO Ahmed Jaudet Bilal while talking to the members of the Agriculture Journalists Association (AJA) on Thursday.
Representatives of the fertilizer manufacturing sectors spoke in length regarding the prevailing gas supply issue and 'the discriminatory treatment being meted out to fertilizer Sector'. They also discussed the negative impact of one of the longest closures of fertilizer plants besides consequent impact on the farming community. Representatives of other fertilizer manufacturing plants were also present.
By adding value to each molecule of natural gas, Lone and Bilal said that the fertilizer sector used gas to convert this raw material to key input for agriculture sector instead of burning precious fuel of gas. Unlike other sectors of economy, it was a matter of fact that there was no alternative of gas as urea manufacturing process could not be completed without gas supply, they added.
In other words, they observed, natural gas was used to produce fertilizer, which was used for good output of crops, hence it had a direct impact on agriculture economy, food security, cotton production and ultimately supplementing textile exports. Besides production of wheat, main food staple, it also played a role in producing the feed for millions of livestock in the country.
They opined, maximum value addition of natural gas is in fertilizer sector if compared with other industries as well as power, CNG and commercial sectors. Alternatives to gas for industrial and other sectors were very much there. These substitutes include furnace oil, LPG, LNG, diesel and coal, they observed.
Top managers of fertilizer sector were of the view that non supply of gas to fertilizer sector was hurting farmers as well as agriculture sector of the economy besides causing maximum urea price hike. Higher input costs and lower produce prices have started crippling the farming community. Fertilizer expenses saw the maximum increase among all inputs during last couple of year.
In the last two years, they explained, urea prices increased by 141 percent to Rs 1810/bag from Rs 750/bag in December 2009. The government imposed two different types of taxes, which includes 16 percent GST and Gas Infrastructure Development Cess of 193 percent. Combined impact of both taxation measures in current price is Rs 384/bag, they said.
Cess impact on Urea manufacturers is Rs 258/bag without GST, however, the industry passed on 50 percent of this impact to the farmers. But the major price increase impact of Rs 537 per bag was due to severe gas curtailment, they said. The fertiliser sector players lamented that despite Pakistan's current urea production capacity of 6.9 million tons, which is world's 7th largest, country spent around $783 million on importing urea and the government had to give a subsidy of over Rs 54 billion on imported urea.
About unfair gas distribution policy, Lone and Bilal said all fertilizer manufacturing concerns have signed a Gas Sale/Purchase Agreement (GSPA) for supply of natural gas to their respective plants for production of fertilizer. The GSPA was for a 12-month supply of an agreed quantity of gas. On the contrary, they said, the gas supply to the fertilizer sector was suspended while general industrial consumers, with only 9-month GSPA, were being provided gas even in winters for four days a week, they said, adding that it was a blatant violation, as the 9-month GSPA did not include winter gas supply. Most of these general industrial consumers had their own captive power plants, which could be operational on dual fuel.