Ministry of Industries and Production (MoI&P) has sought supplementary grant of Rs 10.898 billion to keep Fatimafert and Agritech fertilizer plants operational on RLNG till November 2019, sources close to Secretary Industries told Business Recorder.
This proposal will be discussed by the Economic Coordination Committee (ECC) of the Cabinet on Wednesday (today) with Finance Adviser in the chair. It is also learnt that due to internal fighting between two fertilizer groups, efforts are afoot to block the MoI&P proposal.
Giving the background, the sources said that in order to address the shortage of urea fertilizer, the ECC on April 3, 2019 approved continuous operation of two fertilizer plants, ie, Fatimafert and Agritech till August 2019.
The sources said verified claims of SNGPL till March, 2019 have been paid in full from the budgetary allocation in FY 2018-19. For the current year FY 2019-20, an amount of Rs 1.5 billion has been allocated by Finance Division in the relevant demand of Ministry of Industries and Production. Current budgeted amount is insufficient to clear the outstanding amount of Rs 5.85 billion till July 2019 whereas claim for month of August 2019 is expected to be Rs 2 billion.
In case these plants do not operate after August 2019, National Fertilizer Development Centre (NFDC), Ministry of National Food Security and Research after analyzing the inventory position has stated that there will be no inventory for January 2020.
Based on the comparative analysis of import viz-a-viz local production, Ministry of Industries and Production and NFDC maintain that in the short run continuity of local production of urea by RLNG is a better option as it will result in immediate availability of urea for sale, will save foreign exchange and generate revenue and social benefits. Import is not a viable option due to volatility in prices of urea in international market and depreciation of rupee against dollar.
The Ministry of Industries and Production has further argued that shortage of urea in December 2019-January, 2020 can be avoided by keeping both these plants operational on RLNG for the next three months (September-November) 2019.
Finance Division, sources said, argues that the rate of RLNG for both these plants, ie, Fatimafert and Agritech needs upward adjustment. In view of the comments received from Finance Division, a meeting under the chairmanship of Prime Minister Adviser on Commerce, Textile, Industries and Production, Abdul Razak Dawood was held on September 2, 2019 wherein Petroleum Division, Finance Division NFDC and management of both plants were requested to work out new rate of RLNG.
The sources said it transpired during the meeting that both the plants after keeping their contribution margin at Rs 294/ bag were willing to pay Rs 795/ MMBTU whereas Ministry of Industries and Production based on the working of variable contribution margin for both Fatimafert and Agritech worked out a rate of Rs 827/MMBTU. At the end of the meeting, a rate of Rs 816/MMBTU was agreed.
The Ministry of Industries and Production has proposed that rate of RLNG supplied to these plants be capped at Rs 816/MMBTU for three months (September-November) and in order to keep these two plants operational till November 2019, an additional amount of Rs 4.548 billion would be required for payment to SNGPL. Therefore, the Ministry of Industries and Production has sought supplementary grant of Rs 10.898 billion to keep both plants operational till November 2019.