ISLAMABAD: The government has ordered uninterrupted operations of two Punjab-based fertiliser plants — Agritech and Fatima Fertiliser — on domestic gas supply from Sui Northern Gas Pipelines Ltd (SNGPL) until November this year to ensure sufficient local fertiliser production.

Also, the Petroleum Division and the SNGPL have been asked to charge late payment surcharge (LPS) on gas bills to these plants on an actual basis instead interest on LPS. The two decisions would involve about Rs3-4bn in the form of technical supplementary grants.

A senior official at the Petroleum Division said the Economic Coordination Committee (ECC) of the Cabinet had already approved about Rs2bn additional funding through supplementary grants for the gas price differential while a final decision on waiver of interest on late payment surcharge on past unpaid bills was expected next week. The LPS pertained to SNGPL’s unpaid dues of the two plants for period between September 2018 and November 2019.

The official said the Rs2bn supplementary grant for subsidy on gas supply was required for production of about 700,000 tonnes of urea from these two plants on SNGPL network. The Ministry of Industries and Production had reported that the country would be experiencing about 370,000 tonnes of shortage in December this year.

The move will help produce 700,000 tonnes of fertiliser by December

For making up for this shortage and ensuring a buffer stock beyond 200,000 tonnes by end-December this year, the government either required fertiliser imports worth Rs14bn or allow gas supplies to two Punjab-based plants from March to November (before the advent of peak winter) when local gas has to be diverted to domestic consumers in any case.

The industries ministry had suggested that operations of the two plants until December would help add about 700,000 tonnes of national fertiliser inventory and keep a check on prices in case of local stocks at or around 200,000 tonnes. The ECC had already approved in October last year the Variable Contribution Margin (VCM) rate for running of two plants. On the basis of same VCM calculation and operations of plants for 10 months (March-December) was worked out at 700,000 tonnes at the rate of 70,000 tonnes per month.

Given the fact that gas would not be available in December, the production by these plants would be about 630,000 tonnes by November end.

Gas price of Rs805 per million British thermal unit (mmBtu) for these plants had been worked out with the rate of VCM at Rs186 per bag and dealer transfer price of Rs1,680 per bag as determined by a Fertiliser Review Committee.

Published in Dawn, March 19th, 2021