Gas to fertiliser industry for 15 days in a month: government move to damage ammonia plants, say manufacturers

The local fertiliser manufacturers have strongly opposed government plan to supply gas to the fertiliser industry for 15 days a month, contesting the strategy would damage the ammonia fertiliser plants set up with billions of rupees investment. It is learnt that the fertiliser industry conveyed its concerns to the Federal Minister for Industries and Production Mir Hazar Khan Bijarani during a meeting to review availability of urea and its increasing prices held here on Wednesday.
Bijarani presided over the meeting while Parliamentary Secretary of MoIP, secretaries industries & production, food & agriculture, Chairman Trading Corporation of Pakistan (TCP) and high officials from the ministries of finance, petroleum, commerce and gas companies attended the meeting. Chief Executives and MDs. of all the fertiliser manufacturing companies and an official of the Federal Board of Revenue (FBR) was also present in the meeting.
The fertiliser industry also warned that the proposed plan of 15 days gas supply to fertiliser industry would increase the fertiliser prices further that would have negative impact on agriculture production. Taking into account the genuine concerns of fertiliser companies, minister for industries and production decided to present their suggestions in the next meeting of the Economic Co-ordination Committee (ECC) of the Cabinet. The ECC is a better forum to decide the genuine concerns of fertiliser companies and address their sufferings, the minister assured the industry.
During the meeting, officials of the MoIP informed that due to the imposition of 17% general sales tax (GST) from March 15, 2011 the price of urea manufactured by local private manufacturers have increased from Rs 1080 per bag to Rs 1264 per bag and impact of GST was Rs 184 per bag. The price of urea manufactured or imported by NFC has increased from Rs 970 per bag to Rs 1135 per bag and this includes Rs 165 per bag GST. DAP price was also increased from Rs 3216 per bag to Rs 3763 per bag due to 17% GST which has been accounted at Rs 574 per bag.
The meeting was also informed that recent increase in fertilisers prices was due to the many issues, the price of urea has increased from Rs 800 per 50-kg bag in April 2010 before the gas curtailment to Rs 1187 per bag in April 2011. Whereas the price of DAP has increased from Rs 2609 per 50-kg bag in May 2010 to Rs 4053 per bag in April 2011.
The increase in the fertilisers prices was mainly due to the six factors ie 45 days closure of all fertiliser factories effective from January 2011 on the SNGPL network, 20% gas curtailment on an open ended basis on SNGPL network, 12% curtailment of gas on an open ended basis for fertiliser plants that are provided gas from Mari Gas Field, cost of finance has increased by the SBP has been increased from 0.5% to 1%, the imposition of 17% general sales tax on fertilisers from March 15, 2011.
According to the break up of the price increase due to the said factors, 20% gas volume cut to new plants resulted in increase by Rs 108 per bag, 45 days gas curtailment to new plants resulted in increase in price by Rs 48 per bag, 12% gas volume cut from Mari gas field Rs 60 per bag and all these factors have increased the fertilisers price by Rs 250 per bag.
The Minfa and the TCP told the meeting that there is sufficient stock of Urea and DAP for Kharif. But if the present situation of gas curtailment/shutdown of gas supply to fertiliser companies continues then there might be a shortage of fertilisers at the end of August. The minister while showing his serious concern over the fast increasing prices of urea and DAP said that all fertiliser manufacturing companies must ensure that there is no unreasonable increase in prices of fertilisers. As the much expensive fertilisers would have a badly affect agri. production, he added.
The Representatives of fertiliser companies told their problems in detail in the meeting and demanded that first the government must give them a proper schedule of gas supply. Then the companies would be in a position to tell "how much would be the exact increase in prices of fertiliser." The more indefinite gas shutdown to fertiliser companies mean less production of fertiliser with further high cost of production that would ultimately result in more increase in prices of fertiliser, they added.
The representatives of the fertiliser companies informed the meeting that the government under discussion gas supply plan to fertiliser units for 15 days in a month is not acceptable to them. They categorically told the meeting that gas supply for 15 days a month to fertiliser units is not only feasible but would also result in destruction and damage of their plants.