Gas loadshedding, rising
Ahmad Fraz Khan
August 1, 2011: THE urea crisis, which has gripped the
country since November, is fast assuming a disastrous
proportion, mainly due to the federal government’s quiet
reversal of the national policy for allocation of gas.
By dropping the fertiliser sector below national priority
list for gas allocation, it is risking taking the farming
sector down along with the national economy.
One wonders, if the government has pondered how it would
impact urea price, which has already gone beyond farmers’
financial reach. How it would affect the national production
and how much it would end up importing, and at what cost?
The last nine months have seen urea prices spiraling from
Rs850 per bag to almost Rs1,600 per bag – an increase of
almost 100 per cent – as gas loadshedding started taking its
toll on the fertiliser industry. The increase was twofold;
the industry blaming loadshedding and the resultant increase
in its cost of production, and dealers making money at the
cost of hapless farmers.
The industry claimed it was facing gas shortages that kept
its plants off line, and added to the cost of production to
the tune of 50 to 60 per cent. The rest 40 to 50 per cent
increase came from elaborate but unbridled, paraphernalia of
dealers and sub-dealers who made hay while the sun shined.
So far, the government was only indirectly, and partly,
blamed for failing to control dealers’ mafia. However, by
officially diverting gas from one sector to others, it has
also invited the blame. It would be held responsible for two
reasons: quietly rigging national gas distribution policy
and opening fertiliser prices to speculative pressure.
In addition to loadshedding of around 100 million cubic feet
per day (mmcfd), the federal government, as a matter of
policy, has taken gas away (another 40mmcfd) from the
fertiliser sector and given it to another sector of the
The decision is wrong as it directly flies in the face of
2005 gas policy, which puts the fertiliser sector second
only to domestic in the national schemes of distribution.
The industry has calculated cost of this gas diversion at
around Rs400 per bag, which would effectively take the price
beyond Rs2,000 per bag – around 145 per cent increase within
one year. On production side, the scale of disaster is even
As a result of gas loadshedding and diversion, the
fertiliser planners say production would drop by 400,000 to
500,000 tons during the remaining Kharif and the next Rabi.
The gap has to be met by imports. The cost of import, in its
current international settings, is simply un-affordable for
the country and farmers. The last order that Pakistan placed
for import was at $555 per ton. At that rate, which still
prevails in international market, the country needs around
$2.2 to $2.77 billion for importing urea to meet the
domestic gap. One bag, as proven by the last import, which
is now being docked at the Karachi port, would cost around
Rs3,000 per bag against current domestic price of Rs1,600
The biggest question dogging the government is case of
import would be at what price to sell the commodity in the
domestic market. If it sells at the current domestic price,
it would end up paying almost $1 billion subsidy bill. Can
the government afford that kind of money? If it sells at the
international prices, it would only be risking social chaos
in rural areas.
On the second plank, it also recently leaked to the media
its intentions of 100 per cent increase in price of feed gas
to urea manufacturers. Once the official intentions became
public, the stockists, as expected, swung into action. They
knew they would make windfall by hoarding fertiliser now and
release it few weeks down the line.
Since fertiliser’s use is directly linked to agriculture
production, the total cost of official leak would be much
greater than the hoarders’ profit. Who prematurely leaked
this information to the media and sent fertiliser market,
already teetering on the edge, in tail’s spin needs to
identified and taken to task.
These decisions only prove the nature of official decision
making pattern, which increasingly seem become
individualistic rather than institutional. Had some
institutional input involved in these decisions, many
pitfalls had been pointed out before hand and risks avoided.
But it does not seem to be the case.
As things stand today, powerful lobbies in power corridors
seem to have hijacked decision-making at the highest level,
and unfortunately for farmers, they are least represented at
that level despite voting majority of legislators into
Courtesy: The DAWN