Ill-conceived gas load plan
Local fertiliser manufacturing plants have been forced to
shut down for over six months last year, causing shortage of
this key input and subsequent price hike by whooping 141 per
cent in just two years, claim the representatives of the
Talking to newsmen here on Thursday they said that
ill-conceived gas load management plan badly hampered
manufacturing of urea and hence dealt a severe blow to
Non-supply of gas to fertiliser sector is hurting farmers as
well as agriculture sector besides causing maximum urea
price hike. Higher input costs and lower produce prices have
started crippling farming community. Fertiliser expenses saw
the maximum increase among all inputs during last year.
Within two years, urea prices increased by 141 per cent to
Rs1,810 per bag from Rs750 per bag in December 2009. The
government imposed two different type of taxes which
includes 16 per cent GST and Gas Infrastructure Development
Cess of 19 per cent.
Combined impact of both in current price is Rs384 per bag.
Cess impact on urea manufacturers is Rs258 per bag without
GST, however, industry passed on 50 per cent of this impact
to the farmers. But the major price increase impact of Rs537
per bag was due to severe gas curtailment.
Despite Pakistan’s current urea production capacity of 6.9
million tons, which is world’s 7th largest, the country
spent around $783 million on importing urea and the
government had to give a subsidy of over Rs54 billion on
Despite industry made an investment of $2.3 billion in last
three years on new capacity, the country is sitting on an
idle urea capacity of 2.0 million tons while urea is being
imported spending precious foreign exchange.
Farmers are the real loser in this scenario where due to
massive gas curtailments and ill planning in gas
distribution, farmers had to face a loss of Rs127 billion on
increased urea price in two years.
Manufacturing of fertiliser requires natural gas as
feedstock raw material. The chemical composition of urea
makes it impossible to use any alternative raw material.
Based on this fact, fertiliser sector had been given
priority for gas supply by the government after fulfilling
the requirement of domestic consumers. This priority is
clearly established in the ECC approved Gas Load Management
Policy 2005 as well.
All fertiliser manufacturing concerns have signed a Gas
Sale/Purchase Agreement (GSPA) for supply of natural gas to
their respective plants for production of fertiliser. The
GSPA is for a 12 month supply of an agreed quantity of gas.
On the contrary, gas supply to the fertiliser sector gets
cut off while General Industrial Consumers, with only
9-month GSPA, are being provided gas even in winters for 4
days a week. This is a blatant violation as the 9-month GSPA
does not include winter gas supply.
Courtesy: The DAWN