ISLAMABAD: Amid persistent dearth of foreign exchange, the Economic Coordination Committee (ECC) of the Cabinet on Wednesday decided to provide indigenous gas to two Punjab-based fertiliser plants to meet a 300,000-tonne gap of urea fertiliser through domestic production for the upcoming Kharif season instead of imports.

The single-point meeting of the ECC presided over by Finance Minister Ishaq Dar directed the Petroleum Division to ensure supply of local gas to two fertiliser plants on Sui Northern Gas Pipelines Ltd (SNGPL) network — Fatima Fertiliser, Sheikhupura and Agritech, Mianwali — immediately for bridging the gap between demand and supply of urea fertiliser for Kharif season, beginning April 1.

The revival of two plants would require about 70 million cubic feet of gas per day (mmcfd). It was not immediately clear from where the local gas would be diverted to the fertiliser units but informed sources said the power sector could suffer gas supply cuts with a possible increase in fuel price adjustments in power tariff.

The government discontinued the LNG supply to the two fertiliser plants on Jan 3 as part of the reduction in untargeted subsidies under the IMF programme.

Import option to meet Kharif demand not feasible due to forex shortages

The ECC was informed a day earlier that gas subsidy for the export industry was budgeted at Rs40bn for the current fiscal year but there were other pending claims of over Rs26 billion against subsidised LNG supply to these two plants.

The meeting was told that a Fertiliser Review Committee (FRC) led by the secretary of industries and production and comprising relevant ministries, representatives from all the provinces and fertiliser companies last week had projected total urea demand for Kharif crops at 3.2 million tonnes but estimated total availability of about 2.9m tonnes including carryover stocks from Rabi season.

Therefore, the FRC proposed two options to bridge the shortfall. These included either the two plants on the SNGPL network be operated immediately or arrangements be put in place immediately for the import of 300,000 tonnes of urea so that the import process is completed latest by early May to ward off any impression of shortage in the market at the beginning of the season.

The meeting was informed that ECC already decided on March 30, 2022 that the Petroleum Division should shift the SNGPL-based fertiliser plants to local gas within six months instead of operating these plants on expensive imported LNG and subsidising its pricing. However, the decision remained unimplemented as the bureaucracy forgot to remind the new government in power.

Given the poor situation of the foreign exchange reserves, the ECC on Wednesday decided to provide domestic gas to these two plants. The ECC, however, could not decide on the gas pricing for the two fertiliser plants as the ECC had in a recent meeting assigned the matter to a committee led by Shahid Khaqan Abbasi to suggest a long-term solution to the matter. The report of the said committee is awaited but given the urgency of fertiliser availability, the ECC directed the fertiliser plants be revived first.

Published in Dawn, March 16th, 2023