LAHORE: “The fertilizer manufacturing sector, if supported in a revised fertilizer policy, can export US one billion dollars per annum as domestic consumption stands at 6.1-6.2 million tons against the production capacity of 7 million tons creating a surplus of 700,000-8,000 metric tons. South Korea has recently shown importing urea from Pakistan while many countries bordering with Pakistan can also be a market for the surplus production, thus the sector can be one of the main exporter for the country”.
Chief Financial Officer (CFO) Engro Fertilizers Limited Imran Ahmed stated this while talking to media persons on Thursday. Imran talked about the upcoming fertilizer policy and discussed different proposals prepared by the industry for it.
He said “Fertilizer Policy” introduced in 2001, ensured that the growing urea demand in the country could be adequately met with domestic indigenous gas-based production. However, depleting gas reserves in the country pose an alarming situation. As per recent estimates, the gas shortfall currently at around 720 million cubic feet per day will peak closer to 1 billion cubic feet per day in January 2022. The increased reliance on imported gas is creating a huge gas subsidy burden on the government. “Therefore, there is a need for revisiting fertilizer policy which should aim to eliminate the subsidy on gas for the fertilizer sector and enable the much needed transition towards Weighted Average Cost of Gas (WACOG). It will also help resolve the ever increasing circular debt of gas sector. Moreover, there should be incentives to promote debottlenecking to maximize urea production from gases,” Imran Ahmad added.
He claimed that 72 percent of the balance recoverable gas in the country is not fit for burning and it can efficiently be used for fertilizer manufacturing. At current prices, the industry is all set to provide an annualized import substitution of USD 6 billion, thereby monetizing indigenous low BTU gases in the best interest of the country, he added.
Imran also praised the government policies for agriculture sector and said it has resulted in a record high of 24.3 million hectare depicting a significant growth of 2 million hectare in the last 2 years. Moreover, better farm practices and increased use of hybrid seeds has led to enhanced yields. These factors have contributed to the growth in urea demand in the country which is now forecasted to reach 6.3 million tons in 2022.
He was of the view that waiving the subsidy on gas will definitely increase the fertilizer prices but the government would earn around Rs 90 billion per annum and out of it Rs 65 billion can be given to small growers as targeted subsidy to facilitate them. As globally there is an increasing focus on reducing carbon footprint and GHG emissions, there is a need to incorporate incentives for companies who can come up with investment programs to optimize gas use to produce fertilizers. The fertilizer industry in Pakistan which is globally competitive will thrive under a completely deregulated environment. Following the intent of Fertilizer Policy 2001, the selling price of fertilizers should become completely deregulated enabling free market forces to prevail. Any subsidy going forward should be given directly by the government to the subsistence farmers to ensure continued affordability.
Copyright Business Recorder, 2021
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