ISLAMABAD, May 7: In a major policy shift, the federal government on Wednesday allowed National Fertilizer Corporation (NFC) to set up in Sindh two plants of Urea and Single Super Phosphate (SSP) at a total cost of $500 million.

An amount of Rs5.3 billion would be provided through the Public Sector Development Programme (PSDP) by the federal government while remaining funding would be arranged through NFC’s own liquidity, loans from local banks and listing of 20 per cent shares at the stock market to raise funds.

A decision to this effect was taken here at a meeting presided over by Minister for Industries and Production Liaquat Ali Khan Jatoi.

The urea plant, to be set up at Ghotki, would have a capacity of 861,000 tons per annum and would be based on Mari Gas Field. This plant is likely to be completed in three and a half years.

The SSP plant would be established at Jamshoro with a capacity of 150,000 tons to fill in a partial gap in demand. SSP plant is likely to be installed in less than two years time.

The meeting noted that no private sector entrepreneur was ready to invest in fertilizer plants because of tough competition from importers mainly due to high input costs like gas and electricity rates.

On the other hand, gas supply to fertilizer plants among the competing countries like Bangladesh and UAE was almost free or highly subsidized. The World Bank has already asked the government to do away with existing subsidy on feedstock and put in place about 7.5 per cent tariff increase from July 2003.

The industries ministry officials said that a decision has been taken to meet rising local demand in future.

They said that establishment of a urea plant in the public sector was considered, as the private sector was not coming forward with new projects in spite of the incentives announced in the Fertilizer Policy 2001.

The establishment of SSP plant, a statement said, was essential as the country was heavily dependent on the imported phosphatic fertilizers. The country shall have to import 1.174 thousand tonnes of phosphatic fertilizer in the year 2006-07.

“As there is no proposal to set up any fertilizer plant in the private sector, therefore, National Fertilizer Corporation of Pakistan has been asked by the minister to take this initiative”, the statement said.

The minister said that the proposed two projects were of a great national significance in maintaining the future fertilizer requirements of the country. He directed the NFC chairman to prepare concept clearance documents of both the plants in order to ascertain technical and financial viability of the projects.

Apart from offering other social and economic benefits, the projects are likely to provide thousands of job opportunities directly and indirectly, he added.