KARACHI, May 9: Top executives of the fertilizer industry have urged the government to dedicate old gas fields, discovered, explored and developed at a much less cost, to the fertilizer industry, to make fresh investment feasible in the fertilizer sector.

“We understand, the government is stuck up with the IMF and World Bank conditionalities on gas prices and the way out to this dilemma is to dedicate old gas fields to the fertilizer industry,” Zafar A Khan, President Engro Chemical Pakistan proposed on Thursday at a presentation in which top executives of public sector National Fertilizer Corporation (NFC) and the Fauji Fertilizer also participated.

He specifically named the old Marri gas field, discovered, explored and developed by the private sector, but later on taken over by the government.

All the three top executives, Zafar Khan of Engro, retired Lt Gen Amjad Shoaib of Fauji Fertilizer and retired Major General Mohammad Mohsin of NFC were unanimous that the new fertilizer policy announced in August last year does not provide much room for fresh investment for setting up new plant.

“A typical world scale grass root new 1,000 MTPD Ammonia+ 1,800 MTPD Urea complex requires 400 to 450 million dollars investment which in terms of Pakistan rupee amounts to Rs25 to Rs27 billion,” Khalid Mir one of the executives informed the participants in his presentation.

Asserting that food security remains the dominating issue of Pakistan and that only option is to adequately increase the fertilizer application to augment food crops’ output he proposed import of second hand fertilizer plants as a viable option to increase the production capacities.

But the fertilizer industry is now groaning under an inventory build-up problem of almost half a million tons against which a hefty amount of money is tied up. Obvious reason for this inventory build-up is the drop in offtake because of the persisting drought, which has shrunk the farming activities in the country. Zafar Khan expects an improvement in fertilizer demand by the year 2005 when he hopes that water availability would improve.

At the outset, the Engro Chemical Chief said the main purpose of organizing the presentation is to clarify “certain misconceptions about the industry.” These misconceptions are: fertilizer companies get huge gas subsidy, charge high urea price and that these companies are earning fabulous profits.

He said the gas prices in Pakistan are comparable to those in the US and West Europe. He conceded that gas was being offered at subsidized price to the fertilizer industry. But bulk of this benefit goes to the farming community and net concession for the fertilizer industry in the year 200 was merely 25 million dollars.

He contended that urea was being supplied to the farmers in Pakistan at a much less price than imported, but DAP has to be imported because of expensive cost of import of raw material.

At present total fertilizer capacities in Pakistan is more than five million tons. Bulk of this —4.18 million tons—is urea while about million ton of NP, CAN and SSP can also be produced.

Fertilizer application in Pakistan is estimated at 129 kg per hectare, which is much less than many countries, and food autarky could be achieved by increase in per acre crop yield which is possible by increasing the application of fertilizer.

Executives of the fertilizer industry pointed out that government’s fertilizer policy announced in 1989 played an important role in the augmentation of the fertilizer industry and agricultural output.

In 1989, the then government made priority allocation of natural gas for the fertilizer industry, ensured price stability of feedstock gas for 10 years, exempted import of plant from customs and sales tax, guaranteed DAP floor price at 250 dollars a ton, three to eight years tax holiday.

This policy led to an investment of 1.2 billion dollars increasing urea production by two million tons capacity, DAP 0.45 million tons. It helped in import substitution of 300 million dollars a year.

“Without 1989 policy, the scenario is simply bleak,” one of the executives said.