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costly urea to be imported due to gas shortage

Federal Minister for Finance Dr Abdul Hafeez Shaikh chairing the meeting on Wednesday regarding import of urea for winter.

ISLAMABAD: With the prime minister yet to agree to a 15-96 per cent increase in gas prices approved by the Economic Coordination Committee (ECC) of the cabinet last month, the petroleum ministry has informed the fertiliser companies of its decision to supply them natural gas for 15 days a month with immediate effect.

This will be on top of the annual closure of gas supplies to the fertiliser sector for about three months during winter and a cost of about $550 million on import of about 1.4 million tons of fertiliser. The government will then provide between Rs35 billion and Rs50 billion in subsidy to maintain the existing prices during the next Rabi season, a senior official told Dawn on Wednesday.

The ECC had approved an increase in natural gas prices for all domestic consumers by 15 per cent, 18pc for industrial consumers, 36pc for power sector, including Wapda, KESC and independent power producers and about 96pc for fertiliser feedstock. The final decision was left to the prime minister.

The prime minister was advised against allowing notification of the increased gas prices in view of a case pending in the Sindh High Court.

Sources said that fertiliser plants had been informed by Petroleum Minister Dr Asim Hussain that they would be given gas supplies for 15 days on alternative basis with effect from August 1.

That would mean some fertiliser plants would get gas for first 15 days of the month and then close down for 15 days to divert same quantities to another lot of plants for remaining 15 days.

The fertiliser industry is contesting the gas curtailment which it claims had been reduced from about 400 million cubic feet per day (MMCFD) to less than 150MMCFD even before the usual gas management plan for winter was in violation of their contracts for guaranteed supplies.

Owing to gas curtailment, the country is estimated to require an import of fertiliser about 1.1 million tons to meet agricultural needs. The worst victim is going to be Punjab in case of higher fertiliser imports.

They said the industry would welcome an increase in gas price if suspected misuse of subsidy, but supply curtailments would lead to heavy foreign exchange loss.

The current urea prices stand at about Rs1,360 per bag against Rs2,950 per bag landed cost of imported urea.

That means the government will have to either provide a subsidy as it has been doing during the Kharif season or allow its prices to touch Rs3,000 per bag.

Already the urea price has almost doubled from Rs800 per bag to Rs1,550 per bag over the last 18 months. Interestingly, urea prices have increased by Rs600 per bag in 18 years before the recent increases.

The country has total fertiliser production capacity of about 6.8 million tons against domestic requirement of 6.3 million tons per annum.

In case the government goes ahead with 15-day a month gas closure to the fertilizer, it will have to provide a subsidy of about
Rs110 billion a year to meet domestic fertiliser requirement that has been estimated to face an annual shortfall of 3.5 million tons.

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