KARACHI, Sept 16: Engro Foods Limited, a wholly owned subsidiary of the stock market listed Engro Chemical Pakistan Limited, announced on Friday that the Board had approved investment of Rs2 billion during next year, in setting up a milk processing plant in central Punjab.

The first plant located at Sukkur in which Rs1 billion had been invested, had the milk reception capacity of 300,000 litres per day and UHT milk processing capacity of 200,000 litres per day. The plant provides direct employment to 750 people.

At a press conference, CEO of Engro Foods Sarfaraz Rehman stated that the company proposes to initially spend over $200 million (Rs12bn approx) which “aims at transforming the company within the next five years into a national food industry giant, then into a regional force and finally into a global player”.

Analysts commented that delays in allocation of natural gas — an essential fuel for the fertiliser industry — had forced Engro to diversify into the food business to keep up its growth. The first step in that direction was the dairy business.

Fertiliser companies are in the run to set up new plants so as to meet the growing demand for urea. But due to short supply of gas, the government declared its inability to meet requirements of expansion of all fertiliser companies.

It, nonetheless, promised supply of 100mmcfd gas from Qadirpur field through open bidding. The long awaited bidding date has been announced, which is now as close as September 25. Out of the 13 parties which submitted the Statements of Qualifications (SoQs), four have been pre-qualified to participate in the bidding.

Those include: Orascom Construction Industries (OCI); International Petroleum Investment Company Limited (IPIC); Engro Chemical Pakistan Limited; and Fauji Fertilizer Co Ltd. For the winning party, the government has fixed minimum capacity of the new plant at 950,000 tons per annum (tpa).

In a notice to the shareholders at the stock exchanges, Engro had already announced that in case of success, it would set up a new plant with the capacity to produce 1.15 million tpa of urea.

“Gas supplied from Qadirpur field has a higher heating value and we expect 100mmcfd gas would be enough to produce 1.15m tpa of urea.” commented Hettish Karmani, analyst at Atlas Capital Markets in his current week’s industry review.