ISLAMABAD, Aug 25: The petroleum ministry has complained that all fertilizer manufacturers except one have not utilized additional gas allocated to them as a special measure early this month for enhancing fertilizer production.

Informed sources told Dawn on Wednesday the director general gas informed a high-level meeting early this week that the petroleum ministry had allocated additional gas quotas to the fertilizer manufacturers under a directive of the Economic Coordination Committee (ECC) of the cabinet.

The manufactures had earlier told the government that they were running at a low capacity and if gas supplies were improved, the production would increase by 50,000 tons by December 2004 and further to 175,000 tons by March 2005 owing to further investment and expansion in the industry. Therefore, there will be no need for import of fertilizer as forecast by the food and agriculture ministry.

On this, the ECC had asked the petroleum ministry to ensure maximum gas supplies to the fertilizer units so that domestic production of fertilizer is maximized to avoid its import.

The meeting was informed that except for Fauji Fertilizer Company (FFC), all the manufacturers had failed to utilize additional supplies, although they had been demanding for additional gas to enhance the production.

Based on this situation, the meeting noted that while the manufacturers were extending assurances, the shortage of fertilizer by December 2004 could not be ruled out and hence the option of its import should be kept open.

This was the reason that the ECC in its meeting on Tuesday did not approve a summary of the ministry of industries and production that suggested not to consider import of 245,000 tons of fertilizer as recommended earlier. Instead, a committee was constituted to monitor the fertilizer situation on a regular basis so that there are no shortages and resultant price hike.

However, the manufacturers were of the view that non-utilization of additional gas was a one-time phenomenon that had emerged because of some technical problems and that future estimates should not be based on the production figures of just 10-15 days.

For example, they said National Fertilizer's unit had remained closed for few days for technical problems because the unit was old one, while Dawood Hercules's unit also faced some problems.

However, they assured that they would utilize full gas supplies from now on.

The ECC on August 4 had directed to ensure maximum gas supplies to the fertilizer sector to enhance production and overcome shortage.

The secretary petroleum was directed to review the gas supply situation to the fertilizer sector on a weekly basis and immediately take steps to meet their short-term gas demand.

The ministry of food, agriculture and livestock had estimated a total of 100,000 tons of fertilizer shortage by December 2004. This means that if the local production increased by 50,000 tons by December in view of an uninterrupted gas supply during winter, the country will still need to import about 50,000 tons of fertilizer, for which the government will have to provide some subsidy.

The sources said two new nitrogenous and phosphatic fertilizer plants were coming up and the government would provide them fertilizer feedstock from the fields of Mari Gas Company.

They said the government had reports that the country would be facing a urea shortage during the upcoming season because of its higher exports to Afghanistan and even to some central Asian states.

One of the new plants reaching completion stage is from Fatima Fertilizer and the other is Fauji-Jordan Fertilizer plant. There is going to be a win-win situation for both Fauji and MGCL because both are owned by the same group.

The government is encouraging both the plants to start nitrogenous and phosphatic fertilizer production through dedicated gas supplies. If the gas supplies come from the main transmission system, its tariff is quite high and the profit margin drops.

The gas prices of the Mari field are 10 times lower than normal gas prices and the indirect subsidy goes to the fertilizer industry. The farmers community as well as the World Bank have been saying that over Rs7 billion annual subsidy provided to the fertilizer industry never reached farmers and was consumed by the fertilizer industry.