Fertiliser subsidy challenge

EDITORIAL: One can only wonder what to make of the ministry of industry and production’s proposal to extend subsidised gas supply to two SNGPL-based urea fertiliser plants for another six months, till 30 September 2024.

Earlier the Economic Coordination Committee (ECC) of the Cabinet had, on 7 February 2024, allowed the said plants to operate for the Jan-Mar 2024 period “at the gas rate of PKR1,239/MMBTU and price differential 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”.

Now, MoI&P (ministry of industries and production) has followed the Fertiliser Review Committee’s (FRC’s) recommendation to “move a summary for extension in operations of SNGPL plants beyond March” and directed the petroleum division (PD) to ensure that maximum gas volume/pressure is provided to them.

And since nobody has bothered to explain exactly why the subsidy needs to be extended, it can safely be assumed that policymakers have still not been able to overcome their incompetence in balancing diminishing domestic gas production and international supply volatility with rising demand nor dared to untangle the ridiculous subsidy disbursement mechanism that involves an endless list of ministries and bureaucratic procedures.

First, the subsidy passes through MoI&P, petroleum ministry, Ogra (oil and gas regulatory authority), cabinet division, food ministry and finance ministry. Then it gets lost in inefficient procedures and turf wars of the civil service.

Even then it is not provided to farmers but industrialists running fertiliser plants. And while this circus goes on helpless farmers are forced to turn to the black market, so their crops don’t miss vital nutrients at a critical time; which they often do, and then the lost crop is made up for by last minute, expensive imports.

This time, too, the food ministry has supported MoI&P’s proposal, saying that closure of SNGPL-based plants during the Kharif season will result in a production loss of about 445,000 tons; and the same cycle is set to repeat itself.

It’s a shame that it’s an accepted fact that the country has enough plant capacity to produce fertiliser in excess of demand, yet farmers are forced to turn to the shadow market every winter, that too for a crop as important as wheat.

But it’s much worse that nothing can be done about it. And the nexus between influential industrialists, powerful politicians and corrupt bureaucrats continues to exploit farmers and end consumers in broad daylight.

This is exactly what happens when power corridors frame policies without any input from or regard for on ground stakeholders. Now this system has become so deeply entrenched that only the strongest political will right at the very top can dislodge it. But that’s not very likely, as we have seen. Because no administration, regardless of the party in power, has ever even treated it as a serious problem.

Now, with the economy truly on the edge and subsidies becoming a very thorny issue in IMF (International Monetary Fund) programmes, will this and other such madness finally come to an end? Or, will those that run the most important institutions in this country continue to eat off the fat of the land even as the economy falls over a cliff?

Copyright Business Recorder, 2024