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Four urea plants face closure

Published Dec 16, 2011 03:18am

LAHORE: The fertiliser sector believes that if policies of preferential treatment in supply of gas to certain industries continue, the four plants on the SNGPL network could ultimately face permanent closure meaning the loss of cumulative urea production capacity of up to 2.2 million tons.

The officials of the sector maintain that fertiliser plants on the SNGPL network were facing huge losses due to non-availability of gas despite repeated assurances from relevant quarters on the contrary.

According to the industry sources, currently four major fertiliser plants run on the SNGPL network and all of them have seen their production dropping by varying, but whooping degrees since January this year.

Dawood-Hercules has suffered by a production loss of over 50 per cent drop, Pakarab by 25 per cent, Agritech by 62 per cent and Engro by 60 per cent. Dawood Hercules Fertiliser Limited and Engro even are currently completely shut down due to gas supply being denied, whilst remaining two plants with less production capacity are currently running.

Dawood Hercules has suffered more than other units on the network, claimed its CEO, Rashid Lone. To date, it has been without gas for 180 days since January and fears that it will not get gas for the remainder of December.

The plant has produced only 200,000 tons this year as compared to 456,000 tons last year. The loss of production, which is more than 50 per cent as compared to last year, has not only contributed to an increase in urea prices but also forced the government to import urea, said Lone. So far, the government has imported 700,000 tons costing $378 million, including Rs21 billion as subsidy at the sale price of Rs1,500 per bag. This is a sizeable cost to the exchequer, he added.

Dawood Hercules Fertilisers, because of its location, has been the main source of urea for the last four decades to the farmers of central Punjab and Khyber Pakhtunkhwa. It has now been consistently struggling to get gas but efforts have been fruitless.

In the meeting held on November 15 with Minister for Petroleum and Natural Resources Asim Hussain and the secretary, it was decided that all four units would continue getting gas till the end November. The secretary also promised to have another meeting on November 29 to discuss supply of gas during December.

The sources in the industry claimed that four factories were promised supplies from mid to end November. But, the SNGPL, in clear violation of the directives, decided to curtail gas to fertiliser factories to 100 million cubic feet a day (mmcfd) instead of 170mmcfd on rotational basis, covering Engro-Agritech as one group and Pakarab-DH as second group.

The supply to each group was on 15-day rota basis. Accordingly, Engro and Agritech were scheduled to get gas supply till 15th December 2011 and Pakarab and DH were closed.

On December 3, Asim Hussain directed SNGPL to restore gas to the remaining two units Agritech and DH. Agritech got gas whereas DH Fertiliser is still without gas even today. Pakistan has an installed urea production capacity of 6.9 million tons against 6.3 million tons demand. The total annual urea production for year 2011 is estimated to be 5 million tons. The country is faced with an estimated urea shortage of 1.3 million tons in 2011 out of which government has only catered to import 700,000 tons.