LAHORE, Jan 31: The fertiliser sector saw another year of dismal performance due to unprecedented cut in gas supply as Sui Northern Gas Pipelines Limited (SNGPL) based fertiliser plants lost production capacity by 89 per cent in 2012.
According to the Fertiliser Manufacturers of Pakistan Advisory Council (FMPAC), a representative body of fertiliser companies, out of total production capacity of over 2.2 million tons, SNGPL based fertiliser plants produced only 256,500 tons of urea in year 2012 which is lowest ever production by these fertiliser plants in the history of this sector.
Producing only 11.6 per cent of the total urea production capacity of SNGPL based fertiliser plants shows the worst ever gas curtailment being faced by fertiliser plants in the country, said FMPAC spokesman Shahab Khawaja.
The combined urea production figures are very dismal as the entire fertiliser sector on SNGPL as well as Mari network only produced 4.1 million tons of urea compared to 4.8 million tons it produced last year against an installed capacity of 6.9 million tons, he said, adding: “The overall production loss of 2.8 million tons in a year has never been witnessed before.”
Currently, all four fertiliser plants on SNGPL network are facing a complete shutdown which has resulted in severe production and financial losses for the sector.
Four fertiliser plants on the SNGPL network including Pakarab, Dawood Hercules, Engro’s new plant and Agritech remained the main victims.“Year 2011 and 2012 have been the worst years for fertiliser sector as instead of providing gas to local fertiliser plants to produce economical and affordable urea domestically, the government preferred to import urea by spending a hefty amount of over US$ 1 billion from precious foreign exchange.
The FMPAC maintains that fertiliser sector has been witnessing a steep fall in its production as it produced 5 million tons of urea in 2009 against a capacity of 5 million, 5.15 million tons against 5.6 million tons of capacity in 2010, 4.9 million tons against 6.9 million tons capacity in 2011 and finally 4.1 million tons against the total production capacity of 6.9 million tons in 2012.
According to the FMPAC spokesman, despite the unprecedented gas curtailment in last two years, domestic urea manufacturing plants have provided Rs365 billion benefit to farmers over the last 5 years by keeping local urea prices significantly below international levels.
He said that of the total urea price increase in last two years, about 80 per cent has resulted from imposition of GST on urea and cess on gas, and general inflation. Only 20 per cent of the price increase is due to gas curtailment as government did not honor its gas supply contracts with the fertiliser manufacturers despite the fact that industry has recently invested $2.3 billion in the country based on the government approved policy designed to encourage investment in the sector.
“It is not just the fertiliser plants that suffered losses due to gas curtailment but the government too has also incurred significant losses by importing urea worth over $1 billion and providing subsidy of over Rs50 billion on imported urea in the last 2 years,” he said.
“It is worth noting that urea is the most expensive form of energy that is imported costing around $23/MMBTU, whereas RFO and LNG would be 30-50 per cent less expensive than urea on a MMBTU basis,” Khawaja added.