Two SNGPL-based urea fertiliser plants: MoI&P proposes extension in subsidised gas supply

ISLAMABAD: The Ministry of Industries and Production (MoI&P) has proposed an extension in subsidised gas supply to two SNGPL-based urea fertiliser plants for another six months i.e. till September 30, 2024, official sources told Business Recorder.

Sharing the details, sources said, the Fertilizer Review Committee (FRC) meeting was convened in the Ministry of Industries and Production on March 27, 2024, to assess the need for urea fertiliser for the Kharif season 2024. The FRC recommended the following: (i) Ministry of I&P to move a summary for extension in operations of SNGPL plants beyond March 31, 2024;(ii) Petroleum Division to ensure that maximum gas pressure/volume is provided to FFBL for maintaining optimum production of urea/DAP fertiliser; and (iii) NFDC (Ministry of NFS&R) to firm up the requirement for import of urea fertiliser and present the same in next FRC meeting to be convened in the second week of April 2024.

The ECC of the Cabinet in its decision of February 7, 2024, had earlier decided to allow operations of two SNGPL-based plants for the period January to March 2024 at the gas rate of PKR 1,239/MMBTU and the differential of price with RLNG for such supply to be treated as RLNG diversion to domestic sector for recovery through SNGPL’s revenue requirements to be determined by OGRA. The decision was ratified by the Cabinet.

Urea production: Fertiliser plants to get gas till May 31st: ECC

The ministry proposed the following;(i) SNGPL-based plants i.e. Fatima Fertilizer (Sheikhupura) and Agritech may be allowed to operate beyond 31 March 2024 for six months till September 30, 2024, at OGRA notified price i.e. PKR 1,597/MMBTU (feed and fuel) and the differential of price with RLNG for such supply to be treated as RLNG diversion to the domestic sector for recovery through SNGPL’s revenue requirements to be determined by OGRA; and (ii) Petroleum Division may be directed to ensure that maximum gas pressure/volume be provided to Fauji Fertilizer Bin Qasim Limited (FFBL).

The Ministry of National Food Security and Research has supported the proposal and stated that the closure of SNGPL-based plants during Kharif 2024 will result in production loss of 445,000 tons and the same quantity would have to be imported. Supply of gas to FFBL at maximum pressure will enhance domestic production by 165,000 tons during the Kharif season resulting in reduced reliance on imported supplies. Finance Division has also supported the proposal at para 3 and stated that it is understood that the natural gas will be supplied to the plants, which does not entail any subsidy/cross-subsidy. Moreover, with reference to RLNG needs to be explained, as RLNG is supplied to these plants only during the winter months, when domestic demand for natural gas is higher. Continuous use/diversion of RLNG would result in higher consumer price for all consumers.

The Petroleum Division stated that the previous five months’ operations from November 23 to March 24 resulted in a subsidy of Rs27 billion which is yet to be recovered. Further provision of LNG at subsidised rated @ 1,597 per MMBTU will result in a monthly subsidy of Rs3.8 billion. However, a blend of RLNG and indigenous gas had a portion of 75:25 can be offered to these two plants.

Copyright Business Recorder, 2024