Urea production by Fatima, Agritech: Government to contribute Rs 0.42 billion for cheap RLNG

ISLAMABAD: The federal government is to contribute Rs 0.42 billion for provision of cheap RLNG for production of urea by Fatima and Agritech fertilizer plants from November 3, 2020 onward, well-informed sources told Business Recorder.

Sharing the details, sources said, on June 4, 2020, it was proposed that a committee be formulated to review and recommend the Variable Contribution Margin (VCM). The ECC while considering the summary constituted a committee under the chair of Industries and Production (MoI&P) Ministry with representation from Finance, Petroleum and National Food Security and Research Divisions.

Based on the ECC decision, the MoI&P again submitted a summary and the ECC while considering the summary on July 3, 2020 approved the VCM rate. Later on Federal Cabinet while ratifying the decision by the ECC approved the operations from July 27 to October 26, 2020.

Secretary, MoI&P informed the ECC that summary is in continuation to the Ministry's earlier summary of October 20, 2020 which was considered in the ECC meeting held on October 21, 2020 in which it was proposed that a committee be constituted under chair of Industries and Production with representation from Finance, Petroleum and National Food Security and Research Divisions for reviewing and recommending the appropriate VCM and gas price.

The committee met on October 21, 2020 and while deliberating the cost details, looked at the cost structure breakup, agreed in the previous inter-ministerial committee on June 16, 2020 and proposed revised gas rate of Rs 772/MMBTU by keeping the same Variable Contribution Margin at Rs 186/bag.

National Fertilizer Development Centre (NFDC) (M/o NFS&R) has estimated that for operations of both plants for 30 days, GoP's share as per last notified rate of RLNG by Ogra in July-20 has been estimated at PKR 0.42 billion on the new proposed price, whereas GoP's share for importing similar quantity has been estimated at Rs 1.8 billion.

Ministry of Industries and Production proposed that gas rate of Rs 772/MMBTU (with variable contribution margin @ 186/bag) may be offered to both the units for the period November 3, 2020 onwards (GoP's share at this gas rate has been estimated by NFDC on the basis of RLNG's last notified rate for July by Ogra which would be approx Rs 0.42 billion, and further actual payment by GoP for price differential sum to SNGPL may vary due to difference in monthly rate of RLNG).

Ministry of Industries and Production apprised that as the plants would be closed on 2nd November 2020, the subject case has again been resubmitted in order to ensure that maximum Urea inventory is maintained. And any expected offtake increase for urea fertilizer as has been anticipated by NFDC (MoNFS&R) and discussed during FRC meeting held on October 8, 2020 may be met through addition of minimum 70k urea by these plants in the national stocks on monthly basis.

Copyright Business Recorder, 2020