ISLAMABAD: The Ministry of Industries and Production (MoI&P) is said to be reluctant to take a decision on bridging expected shortfall in urea which may create a shortage in the country.
Sources in the Ministry told Business Recorder that the ECC on June 10, 2020 decided that a committee be constituted under the chairmanship of Industries and Production with representatives from Finance, Petroleum and National Food Security and Research Divisions to review and recommend the appropriate Variable Contribution Margin (VCM).
As per the latest data furnished by National Fertilizer Development Centre(NDFC), it has been projected that national inventory for urea fertilizer would be below buffer stock level of 200,000 MT in December 2020 and January -February, 2021.
The committee constituted by the ECC met on June 16, 2020 wherein request from two shut down plants at SNGPL network, i.e., Agritech and Fatima Fertilizer (Sheikhupura plant) was considered. The committee after going through the costing breakup provided by both plants and previously used in calculation of VCM recommended gas price of Rs 756/MMBTU and VCM of Rs 186/bag.
According to the MoI&P, based on the gas price recommended by the committee constituted by the ECC, a comparison of import viz-a-viz local production has been worked out. On the basis of that comparison there are two potential options: (i) ECC may allow import of 200,000 MT urea ensuring that the national stocks remain above Rs 200,000 MT. Total subsidy on import of GoP at current C&F price has been estimated at Rs 3.440 billion with a forex requirement of $ 47.60 million; and (ii) gas rate of Rs 756/MMBTU (with VCM @ 11.9 per cent of the revenue) may be offered to both the units for three months from July-September. GoP's share at this gas rate has been estimated by taking RLNG's notified rate for June which would be approximately, Rs 0.959 billion. Further actual payment by GoP for price differential sum to SNGPL may vary due to difference in monthly rate of RLNG.
The sources said, previously ECC approved VCM @294/bag whereas in this summary VCM has been unilaterally reduced by MoI&P to @186/bag which is not workable for the plants to restart operations. There was a record off-take of 1.2 million MT urea in June.
Fertilizer sector circles argue that net stock of urea is less than 250,000 MT and that too with only one company. If it is not immediately decided to operationalize closed urea plants at agreed VCM then GoP has to import urea requiring forex and huge amount of subsidy on imported urea.
Insiders in the Ministry of Industries and Production said that they will take a decision very carefully to avoid any scam-like situation.
"We have submitted on ground situation to the ECC which is the competent forum to take such decisions," the insiders added.
Comments
Comments are closed.