Supply of natural gas to two fertilizer plants on the SNGPL network, Agritech Mianwali and FatimaFert Sheikhupura, has been lying suspended since November 2019.
This may lead to a shortage of urea for the agricultural sector.
As per industry sources and National Fertilizer Development Centre (NFDC), the projected demand for urea for 2020 is estimated at 6.2 million tons, the same as last year.
The reduction in urea prices due to GIDC and an increase in support prices for different crops are likely to increase urea off-take during 2020. Local production of urea by the fertilizer plants getting gas from Mari gas fields and SSGCL stands at 5.5 million tons. This shortfall can only be met either through imports or increasing the additional domestic production of urea. Import of around 200K MT urea would require a subsidy of Rs5.4 billion and foreign exchange of US$55 million which will be a big burden on the already stressed national economy.
The production of urea from FatimaFert and Agritech plants for a period of 3 months would ensure the availability of around 200K MT at a subsidy of Rs4.5 billion which will help support the likely higher off-takes.
Both plants have recently appealed to the government that agriculture should be given the highest priority as it can act as a major economic multiplier given the tough economic situation currently faced by the country.
International LNG prices are at a record low right now while the consumption of gas has also gone down in the country due to changes in weather and reduced industrial activity. Hence, this is the perfect time for Pakistan to take advantage of low LNG prices by direct or indirect import of LNG for the immediate restart of these two plants without any subsidy provision.
This is also important for protecting the interest of the local farmers who will certainly benefit from the timely availability of urea at affordable prices as well as a higher competition of brands in the market.
While the resumption of gas supply to these fertilizer plants will also protect the daily livelihood of thousands of workers associated with these fertilizer plants who otherwise stand on the verge of being laid off.
Given the COVID-19 situation, the economic and social impact of reduced employment would be greatly enhanced as alternative economic opportunities are not available. Urea sales witnessed a phenomenal rise registering highest monthly urea off-take of 1.307 million tons during December 2019.
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